The Federal Reserve is expected to cut interest rates for the third time next week, which could lead to lower borrowing costs for consumers. The central bank has already shaved a full percentage point off the federal funds rate since September.
A quarter-point reduction in the federal funds rate would mark the third consecutive rate cut, bringing the target rate to between 4.25% and 4.50%. This change will affect various consumer borrowing costs, including credit cards, car loans, mortgages, and savings rates.
Consumers with credit card debt can expect some relief as interest rates may decrease, although it may take a few months for this effect to be fully felt. Jacob Channel, senior economic analyst at LendingTree, suggests that the Fed might adopt a wait-and-see approach due to uncertainty surrounding President-elect Donald Trump’s fiscal policy.
Mortgage rates will likely continue to fluctuate, and borrowers with fixed-rate mortgages won’t see a change unless they refinance or sell their property. Auto loan rates are already high, making it challenging for consumers to manage monthly payments.
Federal student loans have fixed rates, so the rate cut won’t immediately affect most borrowers. However, private student loans may benefit from lower rates as the Fed cuts interest rates.
In terms of savings rates, the central bank has no direct influence on deposit rates, but yields tend to be correlated with changes in the target federal funds rate. Online savings accounts continue to offer competitive returns, making it a good time for savers.
While the Fed’s rate cut may provide some relief, experts emphasize that it won’t address the root causes of high interest rates and consumer borrowing costs.
Source: https://www.cnbc.com/2024/12/13/fed-likely-to-cut-interest-rates-in-december-what-that-means-for-you.html