The Federal Reserve cut its benchmark by a quarter point. Here’s what that means for the borrowing and savings rates you pay.
The Federal Reserve announced Wednesday it will lower its benchmark rate by a quarter point, paving the way for relief from some of the high borrowing costs that have weighed on consumers.
The federal funds rate, which is set by the Federal Open Market Committee, is the interest rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the central bank’s moves still affect the borrowing and savings rates they see every day.
„The impact on household finances is likely to be mixed“, said Brett House, economics professor at Columbia Business School.
„For households with variable-rate loans or other forms of credit obligations, they are going to see the interest rates on that borrowing come down, almost immediately“, he said. But some longer-term fixed rates remain stubbornly higher than they were a year ago, he added, and many Americans must still contend with lingering inflation, which is driving the cost of goods up.
From credit cards and mortgage rates to auto loans and savings accounts, here’s a look at all of the ways a Fed rate cut could affect your wallet in the months ahead.Credit cards
Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark.
With a rate cut, the prime rate lowers, too, and the interest rate on your credit card debt is likely to follow. But even then, APRs will only ease off extremely high levels.
„Existing borrowers could see their rates go down by half a point or so — maybe a little more — by early 2026“, said Ted Rossman, senior industry analyst at Bankrate.
