Federal Reserve Rate Cuts, What It Means for Your Money
The Fed lowered interest rates for the first time since 2024. Here’s what this means for you.
The Federal Reserve is expected to cut interest rates again on October 29, according to personal finance app company WalletHub, but most Americans don’t seem to care much about lowering interest rates, even if they end up saving money.
Almost two-thirds (65%) of Americans are indifferent or dissatisfied with the Fed’s interest rate cuts, and 59% said an additional quarter-point rate cut would not change their lives, according to an online survey of 200 people conducted by WalletHub between September 29 and October 3.
WalletHub said this view may come as a surprise as further rate cuts could save consumers billions of dollars. Credit card interest rates will fall in tandem with the Fed’s rate cuts, and we estimate that credit card users will save at least $1.92 billion in interest over the next 12 months. Meanwhile, the average annual interest rate on a 48-month new car loan should fall by about 0.12 percentage points in the months following the 0.25 percentage point cut, the report said.
“If the Fed cuts interest rates a second time in the coming months, consumers will save billions of dollars next year alone,” said WalletHub editor John Keenan. However, Americans “still carry trillions of dollars in debt, and interest rates remain very high. Also, many lenders have become more selective with the outlook for the economy, so low interest rates remain difficult to obtain.”
What are interest rates currently like and where do you expect them to go?
Last month, the Federal Reserve lowered the short-term federal funds rate by 0.25 percentage point to a range of 4.00% to 4.25%. The decline was the first since December 2024 and was done to support a slowing labor market.
CME’s FedWatch tool, which tracks the probability of interest rate changes at each Fed meeting, shows there is a 99% chance of another 15-minute rate cut at the central bank’s next meeting on October 29th, lowering the federal funds target range to 3.75% to 4.00%. At the December 10th meeting, there is also an almost 99% probability that there will be another 0.25 percentage point cut, which would reduce interest rates from 3.50% to 3.75%.
Why aren’t people interested in rate cuts?
Still, “many people are so focused on inflation that they don’t care about a quarter-point rate cut,” Keenan said.
A WalletHub survey revealed that a whopping 93% of respondents still view inflation as a problem. Forty percent of Americans surveyed said the Fed’s restraint measures were also bad.
“Ironically, cutting rates too soon could reignite inflation,” Keenan said. Lower interest rates should make borrowing cheaper and encourage spending and the economy. Generally speaking, when more people demand a product or service, the price also increases.
Are Americans worried about the job market?
While most Americans (60%) think the economy is getting worse rather than better and that it’s harder to find a job right now, they generally still think inflation is more scary, the WalletHub survey showed.
The survey found that more than two in three respondents (78%) are more worried about inflation stealing their money than artificial intelligence taking their jobs.
Where is inflation going now and where do you expect it to go in the future?
Annual consumer inflation rose 2.9% in August, up from 2.7% in July. Core interest rates, which exclude the volatile food and energy sectors, rose 3.1%.
The last monthly inflation report released by the Bureau of Labor Statistics before the government shutdown began on Oct. 1 was in August. All but one of the department’s 2,055 employees were furloughed due to the government shutdown. The September report, scheduled for October 15, has been postponed.
However, while the government remains closed and there are no signs of reopening anytime soon, the BLS has made an exception. The BLS announced that September inflation data will be released on October 24 at 8:30 a.m. ET to allow the Social Security Administration to calculate and release Social Security Cost of Living Adjustment (COLA) information.
Without the September inflation report, it is not possible to calculate the annual COLA. The annual COLA is based on the average annual increase in the consumer price index for urban salaried and office workers (CPI-W) from July to September.
Economists at Wells Fargo expect annual inflation to rise to 3.1% in September and core interest rates to remain at 3.1%. “The September CPI release date may have changed, but the stubborn inflation situation remains unchanged,” the official said in a note.
Medora Lee is USA TODAY’s money, markets and personal finance reporter. Please contact us at mjlee@usatoday.com. Subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday to Friday morning.
