How Will Fed's 'Great News for the Middle Class' Affect You?

Unusually hefty half-point rate cut will mean possible relief on car loans, mortgages, credit cards
By Jenn Gidman,  Newser Staff
Posted Sep 19, 2024 8:05 AM CDT
How Will Fed's 'Great News for the Middle Class' Affect You?
The rate decision of the Federal Reserve is shown on a TV screen on the floor of the New York Stock Exchange on Wednesday.   (AP Photo/Richard Drew)

Borrowing over the past couple of years has been a painful prospect for Americans, as high interest rates meant to curb inflation kept consumer payments steep. Now, after the Federal Reserve made its unusually large half-point cut on Wednesday, leading to a key interest rate of between 4.75% and 5%, how will it affect citizens' wallets? "This will improve the material well-being of all Americans," says Joe Brusuelas, chief economist at RSM US, per the Washington Post. Michael Madowitz, principal economist at the Roosevelt Institute, calls the rate slash "great news for the middle class."

  • 'Five key areas': The New York Times breaks things down on how the rate cut will affect auto rates, credit cards, mortgages, savings accounts/CDs, and student loans. NPR gets more granular here on the housing market specifically.

  • Jobs, stocks: Forbes notes that for the former, "lower rates are typically associated with friendlier hiring, as employers' bottom lines get a boost from cheaper borrowing costs." In terms of stocks, the magazine says that slashing interest rates is "typically considered a boon," though the market didn't see a huge immediate boost on Wednesday after the Fed's announcement.
  • Around the world: "Central banks with currencies tied to the dollar often link their rate decisions to the Fed, such as Hong Kong and many Gulf states, so borrowers in those countries will also see an impact," the BBC reports. The outlet notes that investors in other nations who dabble in US stocks would also benefit.
  • Where to put your money: Per the Wall Street Journal, it's time to "recalibrate" any cash you have lying around, with the suggestion to put enough aside for emergencies and short-term needs for the next two years in a high-yield account, or in a CD or bond. As for medium-term savings goals, one financial planner recommends bonds or CD ladders with varying maturity dates.
  • CDs: If you go this route, CBS News has advice from three financial experts on how to maximize your returns. One nugget: Don't walk away from a good promotional rate or other special offer.
(More interest rate cut stories.)

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