The Fed cut interest rates by half a point. Will it change anything?

The Federal Reserve cut benchmark interest rates for the first time in years. The decision did not surprise experts; what did was the amount: half a point.

AP News said most Federal Reserve officials agreed they would cut benchmark interest rates weeks before the meeting. It was an expected move.

However, experts had predicted that the Fed would take a more conservative approach and lower interest rates by far less than half a point.

Investors and experts awaited the decision anxiously, fearing the US economy could be cooling down due to the long-held historically high rates.

There was also a political element. Democrats expected the Fed to reduce interest rates in July, months before the elections, and Republicans made clear they wanted it to wait.

Aside from the political expectations, which the Fed generally hopes to avoid, high interest rates served as an instrument to fight growing inflation after the pandemic.

Americans were hit with record-high prices of vital resources like food and gas. Interest rates aim to cool down inflation, not lower prices.

Lower prices would have signaled a cooling economy, which negatively affects employment and wages. The Fed wanted to stop inflation without cooling the economy.

So, what can you expect of the bold Fed move? It could benefit individuals, but it also has a negative side.

The Fed's benchmark interest rates do not dictate the interest rates banks should place for their clients. They indicate the interest rates for bank-to-bank loans.

However, according to CNBC Select, these rates can also guide banks' interests in individualized loans and other services.

Therefore, now that the Fed has announced the new benchmark rates, you can expect the interest on your credit card, loans, and car payments to lower.

Amy Hubble, principal investment advisor with Radix Financial, told the outlet that mortgage rate changes are more complex. Still, she said it is also fair to assume they can go down.

According to an AP News analysis, much of the housing market problem is a supply-and-demand imbalance. Homeowners were discouraged from selling due to high interest rates.

Experts feared that if the Fed had chosen a more conservative cut, it wouldn't have been enough to get the market moving. So, the half-point cut was perfect from the housing perspective.

Other things will also lower, like the interest on a Certificate of Deposit or yielding savings accounts. So, if you did not take advantage of the high interest rates, now is too late.

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