How Will the Fed Rate Cut Affect You?

The Federal Reserve cut rates again, slashing them another 25 basis points to 4.50%. So, how will this affect you? The answer depends on what kind of debt and investments you have.

Adjustable rates: These will fall. Whether it’s an adjustable rate for your credit card, or the rate on a home equity line of credit, it is likely to drop, lowering your monthly payment. You could even see the change relatively soon.

Car loans: The Fed rate cut will probably not affect a new loan for a car. Marketing is the big driver of car loans, since the idea is to draw customers in.

Mortgage loan: While the Fed rate could affect the mortgage rates, a bigger factor is 10-year Treasury rates. However, inflation concerns are part of the equation, and the rhetoric accompanying the rate cut indicates that future rate cuts are unlikely any time soon.

Investments: Normally, a rate cut boosts stocks, since the lower returns on bonds drives investors to stocks. And while stocks went up on Wednesday, the economic uncertainty due to earnings reports and trepidation over today’s payroll data, Thursday’s stock market saw a rather dramatic plunge.

Cash investments: Because the Fed rate cut affects the cash rate, bonds, CDs and your savings account will see a drop in yield. For CDs, the rate is usually fixed for the term, so you won’t have to worry about a drop unless you renew while the rate is still low.