It finally happened.
After months of panic-induced anticipation, the Federal Reserve of the United States of America has finally decided to cut interest rates by 50 basis points.
This is the first time the bank is slashing rates since March of 2020. The motivation is recent data that showed America’s economy is growing steadily, even as job gains have slowed down.
Unemployment has risen slightly, though it remains relatively low. Meanwhile, inflation is closer to the Fed’s goal of 2%, but it’s still higher than they’d like.
In its statement, the Fed says its goal is to maintain a delicate balance between maximum employment and price stability. The committee believes the risks of not hitting either of those goals are more balanced now than they were before.
But they aren’t entirely sure what’s coming next for the economy. It’s still hard to tell which way things will go. The central bank said that:
“The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.”
Expectations in the aftermath
Lower rates mean mortgage rates will likely drop, making it easier for people to refinance or buy a home. So, if you’ve been sitting on the fence about homeownership, now might be a good time to jump in. MIGHT.
Car loans and personal loans should also get cheaper. This could push more people to take out loans for big purchases, which helps boost spending—a key part of keeping the economy moving.
Businesses are likely to benefit from cheaper borrowing costs too. This could lead to more investments and hiring.
With lower interest rates, companies may find it more affordable to fund new projects or expand their operations. That might reverse the recent slowdown in hiring and give wages a boost as businesses look for more workers.
Right now, the economy is growing at around 3% annually, according to the Atlanta Fed’s model for Q3 2024. That’s better than many expected. With consumers spending more, thanks to cheaper loans, this growth could get even stronger.
But on the other hand, if you’ve been enjoying high returns on your savings, you might want to brace yourself for lower yields.
High-yield savings accounts and CDs, which were offering solid returns during the Fed’s rate hikes, will likely see those rates fall. For example, six-month CDs that were giving 6% interest will probably take a hit after this cut.
If you’re relying on traditional savings products, it might be time to rethink your strategy. With lower rates, the returns won’t be as attractive.
And that’s where crypto comes in.
This is a developing story
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