The costs of 30-year mortgages and new car loans have been inching down in recent months, welcome news for borrowers who have endured years of high prices and high interest rates.
These borrowing costs are expected to fall further: The Federal Reserve is poised to cut its benchmark interest rate on Wednesday, and officials are likely to suggest more cuts to come.
Source: Federal Reserve
Note: The rate since December 2008 is the upper limit of the federal funds target range.
When the Fed lowers its benchmark rate, it is ultimately trying to reduce borrowing costs for businesses and consumers. Setting rates is one of the key ways the Fed can try to speed up or cool down the economy, which can include what lenders offer prospective homeowners, car buyers and other consumers.
Wednesday’s expected announcement will be the first time in more than four years that Fed will have cut rates, following a long fight to tamp down a surge in inflation spurred by pandemic-related supply chain snarls and other factors.
Borrowing costs hit a two-decade high as part of the Fed’s inflation fight.
Source: Federal Reserve
A variety of factors go into the Fed’s decision to change rates, including the strength of the labor market. Hiring throughout much of the U.S. economy has been healthy in recent months, with wages still growing and many Americans still eager to work.
Unemployment, however, has been slowly rising, and wage growth has begun to slow.
That has raised questions about whether the Fed waited too long to begin lowering rates. It has also contributed to many people’s anxieties about the state of the economy.
Even as inflation has cooled, months of rapid price increases have left a lasting mark for many consumers. And the costs of many household items, big-ticket purchases and crucial services remain high for many people.
Source: Federal Reserve
While Wednesday’s news will likely bring relief for shoppers and borrowers, the effects of Fed rate changes are not instantaneous, and it could be months before credit card APRs, mortgage costs and other interest rates meaningfully change.
Source: Economy - nytimes.com
