For the first time in nine months, the Federal Reserve has cut its key interest rate, a move that signals a shift toward easing monetary policy. The rate now sits in a range between 4% and 4.25%, down a quarter-point from where it had been since late last year.
But while the rate cut could eventually lower borrowing costs, financial experts caution that the impact on most people’s day-to-day finances won’t be immediate.
High inflation continues to squeeze Americans.
“It’s affecting me. Definitely, certain things have gone up in price,” Christopher Robinson, a consumer in Phoenix, said.
And stagnant wages aren’t helping.
“If you're working for lower wages, all the prices seem to be going up, but not the wages as well,” David Henzerling, of Scottsdale, Arizona, said.
The rate cut may ease pressure in some areas, but don’t expect a quick fix.
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“I don't know how much people are going to feel this in their day-to-day,” Kate Ashford, an NerdWallet Investing Specialist, said. "I think this is going to make borrowing a little bit cheaper, and it's going to drop savings rates, probably a little bit over time. But in your day-to-day life, groceries, gas, healthcare, this isn't really going to drop costs all that much.”
Still, Ashford recommends using this shift as an opportunity to reassess your finances and make some strategic moves that can lead to long-term financial gains.
Her advice: focus first on tackling high-interest credit card debt. Look for zero-percent balance transfer cards to consolidate and save money.
Next, make sure you have an emergency fund, ideally enough to cover three to six months of expenses, kept in a high-yield savings account.
She also suggests locking in good rates while they're still available, especially in certificates of deposit (CDs) and online savings accounts.
For those with higher mortgage or auto loan rates, it may be a good time to explore refinancing options to lower your monthly payments.
“This is kind of a long game for people. But it is those little steps you take over time that add up in the end,” Ashford said.
For homeowners, the rate cut could bring new opportunities - if they act quickly.
“This is going to make it easier for you to afford a home,” Cynthia Fick, CEO of Financial Life Planners, said. “If you already have one, and you're up at, you know, 7% or so in your mortgage rate, you might want to consider refinancing. I don't think interest rates will be going back down to 3% or less, but they may have further to go.”
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Some consumers say they’re not pretending this is a magic wand.
“There’s too many variables at play,” Henzerling said.
Still, some consumers say the rate shift is enough to influence their financial strategy.
“It’s definitely changing the level of risk I’m willing to take on in the near future. It's definitely making me make appropriate adjustments to my long-term plan,” Robinson said.
Fick encourages consumers to stay grounded but optimistic.
“We’re going to have volatility. We’re going to have ups and downs in all aspects of our financial lives,” Rick said. " In the long run, I think we’re in a very good time, and that investors and consumers should keep an open mind to things going a little bit better than they might think they will.”
This story was reported on-air by Jane Caffrey at the Scripps News Group station in Phoenix and has been converted to this platform with the assistance of AI. Our editorial team verifies all reporting on all platforms for fairness and accuracy.
