5 Key Effects of Fed Rate Cuts on Workers and Consumers

1. Mortgage Rates Will Come Down

The housing market faces a unit shortage, making affordability an urgent issue. However, a drop in interest rates should lead to a further decline in mortgage rates. Currently, the 30-year fixed mortgage rate averages 6.2%, the lowest since February 2023.

2. Auto Loan Rates Should Also Decrease

With the falling interest rates, borrowing costs for new and used cars are likely to drop. As of now, the average new car loan rate stands at 9.61%, while used car loans are at 13.91%.

3. Less Lucrative to Save Money

Lower interest rates will diminish returns on savings accounts. Although the national deposit rate was 0.46%, this is still relatively high compared to the rates seen before the Fed's hikes started in 2022.

4. Employment Conditions Could Improve

Currently, a tighter job market is evident. However, as the Fed cuts rates, it could stimulate job availability and improve labor conditions.

5. Low Interest Rates Support a New Fiscal Environment

With landmark legislation in place, a low interest rate environment could enhance domestic investments in sectors like manufacturing. Economists emphasize that achieving productivity gains is essential to balance U.S. deficits.