MEMPHIS, Tenn. – A key decision by the Federal Reserve could soon lower borrowing costs for Americans carrying debt.
Economists widely predict the nation’s central bank will cut interest rates at itsโ meeting this week. This move comes as the economy navigates a complexโค landscape of persistent inflation โand a softening job market. The change directly impacts the interest rates onโฃ manyโ types of loans,potentially โฃoffering reliefโค to consumers and businesses โalike.
What are interest rates?
The Federal reserve, often calledโฃ “the Fed,” controls the federalโฃ funds rate – a key benchmark that influences interest rates throughout the economy. โWhenโ the Fed lowers this rate, it generally becomes cheaper to borrow money.
How does inflation influence interestโ rates?
The Fedโ uses interestโ rates as a primaryโ tool to manage inflation.โ Lowering rates encourages borrowing and spending, stimulatingโ economic activity. conversely, raising rates discourages borrowing, helping to โฃcool down an overheating economy and curb inflation.
During the Covid-19 pandemic, the Fed slashed rates to โnear zero to bolster the โeconomy. However, โฃthis contributed to a surge in inflation by 2022. The Fed responded with aggressive rate hikes, increasing rates by approximately five percent โbetweenโ 2022 and 2023 toโข regain control of rising prices. since than,โฃ rates โhave โbeen lowered byโฃ aboutโฃ one percent.
What’s next for the economy?
Currently,inflation remains above the levelsโค economists โhadโข anticipated,whileโ the jobโข market is showing signs of weakness. Economists believe a rate cut is necessary to inject cash into the economy and support โคgrowth.
How will a โคrate cut impact my debt?
Consumers with variable-rate loans,โ such as someโค credit cards and adjustable-rate mortgages,โค will likelyโข see aโ decrease in their monthly interest โpayments. Those โฃwith fixed-rate loans may need to refinance to take advantage of lower rates. New loans and other debt โwill become less โexpensive to finance.
Download the โFOX13 Memphis app to receive alerts from breaking news in your neighborhood.
Trending stories: