All or nothing.
The Federal Reserve did not hold back when it cut interest rates for the first time in more than four years.
While the rate cut was never in question, its magnitude was widely discussed before Wednesday’s announcement. There was speculation that the decision for the larger cut could be an indication that the Fed is worried about the economy. (The worse things are, the more relief is needed, the thinking goes.)
Fed Chairman Jerome Powell allayed those concerns. In a press conference following the announcement, Powell said he believed the economy was moving in the right direction.
However, do not get used to drastic interest rate cuts, because Wednesday’s 50-point cut is no guarantee that the central bank will maintain this pace in the future, Powell said.
iStock; BI
So what does this interest rate cut mean for… everything?
First of all, don’t expect immediate changes. It will take a while for the effects of the cut to become visible. reach the rest of us.
But that doesn’t mean you can’t plan ahead. Our colleagues at Personal Finance Insider have looked at the possible effects of the interest rate cut on various financial products.
Let’s start with mortgage rates, because that’s an area that people naturally think about when it comes to interest rates. Bad news for potential home buyers: Don’t expect a significant drop in mortgage rates in response to the Fed’s announcement, as the market has already priced in the cut.
And if you are tied to a high mortgage rate, maybe wait with refinancing until further cuts occur.
Another important aspect is Where you can park your moneyThe reduction means that the interest rates banks offer on their savings accounts will likely eventually fall.
For this reason, you may want to invest some of your idle cash in high-interest savings accounts and money market accounts.
However, experts stressed that it is important not to panic about investments. Instead, use the new interest rate as an opportunity to Rethink your investment strategyThis could include further diversifying your investments or even reinvesting in bonds.
The interest rate cut will also not be enough to significantly lower high-interest credit card debtInstead, you must continue to do it the hard way: consolidate debts and prioritize their repayment.
The Insider Today team: Dan DeFrancesco, deputy editor and moderator, in New York. Hallam Bullock, senior editor, in London. Milan Sehmbi, fellow, in London. Amanda Yen, fellow, in New York.
