The half-point cut could help auto buyers and spur the economy
of ConsumerAffairs
For the first time in four years, the Federal Reserve has cut a key interest rate, signaling that it believes it is beginning to win the war against inflation.
The Feds Open Market Committee voted to lower rates by 50 basis points, meaning the federal funds rate will hover between 4.75% and 5%. The Fed began regularly raising the rate in 2022 when inflation accelerated.
The cut was highly anticipated on Wall Street, improving profit margins for unprofitable companies that need to borrow money to stay afloat. When borrowing costs go down, these firms have a little more breathing room.
Stocks of other companies rallied on the news in hopes that the reduction in interest rates will improve the economy.
For consumers, the Feds rate cut is good news. The federal funds rate is directly linked to the interest rate on credit cards, which is currently at a record high. The average credit card rate is more than 20%, so any reduction in the rate means more of the monthly payment goes toward paying off the balance.
While this rate cut may not make a lot of difference, theres a strong belief among Wall Street investors that this is the first of what may be several rate cuts over the next few months.
The rate cut and additional cuts if there are any will also make buying a car a little less expensive. Auto loan rates are also tied to the federal funds rate and go down when the Fed cuts.
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-09-18 18:03:43
