By Shreya Biswas

Copyright indiatimes

Federal Reserve interest rates

Federal Reserve interest rates: The Federal Reserve lowered its benchmark interest rate by 0.25 percentage point to a new range of 4% to 4.25% on Wednesday for the first time since December last year. The Fed rate cut has on on households, here’s a look at all of the ways it could affect your wallet in the months ahead.Fed Rate Cuts’ Mixed Impact on Household FinancesBrett House, economics professor at Columbia Business School, said that, “The impact on household finances is likely to be mixed,” as quoted by CNBC. He pointed out that, “For households with variable-rate loans or other forms of credit obligations, they are going to see the interest rates on that borrowing come down, almost immediately,” adding that some longer-term fixed rates remain stubbornly higher than they were a year ago and many Americans must still contend with lingering inflation, which has increased the cost of goods up, as reported by CNBC.ALSO READ: Fed cuts interest rate: How does it affect your mortgage rate & what homebuyers need to knowHow Fed Rate Cuts Influence Credit Card Interest RatesAs most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark rate, so that means that with a rate cut, the prime rate lowers too, and the interest rate on your credit card debt is expected to follow, according to the report. While the annual percentage rate will only ease off extremely high levels, as per CNBC. Since the average credit card rate is currently over 20%, which is near an all-time high, so APRs will remain close to 20% at least into next year, said Ted Rossman, senior industry analyst at Bankrate, as per CNBC.Live EventsRossman also pointed out that, “Existing borrowers could see their rates go down by half a point or so — maybe a little more — by early 2026,” as quoted in the report.ALSO READ: Travis Kelce and Taylor Swift wedding planning: Choosing live music for their big dayImpact of the Fed Rate Cut on Auto Loan Rates and Car BuyingAmericans have faced high auto loan rates over the last three years after the Fed has increased its benchmark interest rate starting in early 2022 and now a cut will not drop the loan rates immediately but will contribute to eventual relief, according to an AP report.Bankrate analyst Stephen Kates explained that, “If the auto market starts to freeze up and people aren’t buying cars, then we may see lending margins start to shrink, but auto loan rates don’t move in lockstep with the Fed rate,” as quoted by AP.Jessica Caldwell, Edmunds’ head of insights, pointed out that, “a modest Fed rate cut won’t dramatically slash monthly payments for consumers,” adding, “but it does boost overall buyer sentiment,” as quoted by CNBC. Even though the rate cut or low-APR promotions may not drive car buying due to high vehicle prices, but Caldwell said that “these cues gain power when paired with sales events like model-year closeouts, Black Friday deals and year-end promotions,” as quoted in the report.Federal vs Private Student Loans: Who Benefits from the Fed Cut?Federal student loan rates are fixed and only reset once a year on July 1, so most borrowers won’t see immediate changes from a Fed rate cut, as per the CNBC report.But if you have a private student loan, your rate might be fixed or variable, often tied to benchmarks like the Treasury bill and in that case, a Fed rate cut could lower your interest rate automatically, CNBC reported, citing a higher education expert Mark Kantrowitz. FAQsWill auto loan rates drop right after the Fed’s rate cut?Not immediately. Auto loan rates move more slowly and don’t track the Fed rate exactly.Are federal student loan rates affected by the Fed’s rate cut?No immediate change. Federal loan rates reset only once a year on July 1.Add as a Reliable and Trusted News Source Add Now!
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(You can now subscribe to our Economic Times WhatsApp channel)Read More News onfederal reserve interest ratesdow jonesdid the fed cut rates todayfed cut ratesfederal reserve meeting interest ratesfed cuts interest ratesmortgage rates todayfed decision todayhousehold financescredit card interest rates(Catch all the US News, UK News, Canada News, International Breaking News Events, and Latest News Updates on The Economic Times.) Download The Economic Times News App to get Daily International News Updates….moreless