September 27, 2024/midnight 

Erie, Pa.—Last week, for the first time since 2020, the United States Federal Reserve cut interest rates. This cut left many Americans wondering what the effects of such a cut could be, and what this means for the country’s economy. According to Al Jazeera, the Fed cut interest rates by half a percentage point, which is much greater than usually implemented rate reductions. 

Prior to the reduction, interest rates stayed at a 23 year high for more than a year, being at a 5.33 percent. As of September 18, once the cut was enacted, the rate went down to 4.83 percent. According to CBS News, this rate shows what banks charge one another to borrow money, which in turn influences the rates that these banks and lenders charge the average consumer for loans and other credit products. 

The chair of the Federal Reserve, Jerome H. Powell, called this cut a “recalibration” of the interest rates, done to strengthen the job market and get rates steadily down to the Fed’s goal of 2 percent. It is important to note that the Fed does not plan to continuously cut rates in a planned and predictable manner. Each cut that is down within the next year or so will be implemented, when deemed most appropriate for the market. 

So why should you care about such a sudden and severe drop in interest rates?  

First, this is something to keep in mind if you or someone you know is planning to buy a home or vehicle soon. This cut, along with the cuts which the Fed is planning to implement within the remaining months of 2024 and 2025, could make taking out a mortgage or a car loan much more affordable. 

Lower interest rates also benefit credit card holders as well. According to bankrate.com, when the interest rate moves, the prime rate attached to credit cards moves as well. In early September, the national APR rate was at 20.78 percent, and with the Fed’s cut the APR rate will follow. But it will only save those in credit card debt a couple dollars and not make much of a difference if a credit card holder owes a large amount. 

As of now, inflation does not look to be directly affected by these interest rate cuts, but with time and additional adjustments that might change.  

To conclude, the Fed’s decision to drop interest rates in this manner is something that we all should pay attention to especially those of us who are in the market for bigger purchases, like a car or a home. It is also important for credit card holders, those who have high-yield savings accounts and loans to know how this rate cut could hurt or help them, in terms of saving or losing a couple dollars.