It’s finally happened! Economists and fancy-suited talking heads everywhere are giddy like it was Christmas, their birthday, and Amazon Prime Day all rolled into one. What is this momentous occasion? The Fed finally cut the prime rate!
Wait, wut?
If you’re underwhelmed and unimpressed by that news, just pause there for a moment. It really is a big deal, and should impact you, mostly in a good way. Let’s check it out!
Here are Five Fast Facts on the Fed’s rate cut:
- 📉 The Cut - After months of dithering and posturing about whether inflation was under enough control, the Fed finally cut the prime rate by .5%. It’s the first rate cut since early 2020 and it brings the rate down to the 4.75-5.0% range. While this is the only rate controlled by the Fed, it’s also the key signal that most other rates use, and they will generally follow this one. The first domino, if you will.
- 🏠 Coming Home To Roost - Probably the biggest impact comes in the form of mortgage interest rates. They had already been creeping down a bit in anticipation of this cut, but the current 19-month low average of 6.2% will probably keep falling over the coming months. Time to start house hunting again!
- 💳 Less Sorrow To Borrow - Another place you will see some relief is credit card debt (not that anyone has any right now, of course), HELOCs, and consumer loans. Some will come down almost immediately, some will take a bit longer, but you should definitely see some relief on this since they are usually tied directly to the prime rate.
- 🏪 Business Benefits - With the cost of borrowing lower, businesses get some relief, too. This means they’re more likely to expand and invest, typically meaning more hiring is on the way, too.
- 🤔 Investment Strategy Changes - The biggest downside is that those awesome high interest savings accounts and investments will be a little less awesome. On the other hand, stocks usually get a bounce as people begin pushing their money back out a bit more into more aggressive investments. It just depends on where you have your money, so it may be time to give your money guy a call and talk about some changes.
🔥Bottom line: A cynical skeptic might call out the fact that the rate was cut only weeks before the election, a very convenient timing for certain candidates. But that’s not us, nope, huh-uh. Regardless of the political ramifications, this is good news for us normal folks struggling to pay bills and make our money stretch to the end of the month - our Paychecks should now go a little bit further! There are two more Fed meetings between now and the end of the year, and most experts think there will be some additional cutting in the near future, too, so hopefully this isn’t the end of it!
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