The Federal Reserve cut interest rates on Thursday for the second time in three months, likely setting the stage for a drop in borrowing costs.
The Fed cut rates a quarter of a percentage point.
Jared Pincin, an assistant professor of economics, said that the biggest impact of Thursday’s rate cut is on loans.
“The lower the federal funds rate is and the other interest rates that the central bank influences or controls, the lower you’ll see interest rates on borrowing,” Pincin said.
Aside from loans, Pincin said the cut will also impact savings accounts.
“Not just what you would spend on but also what you would save on,” Pincin said.
As for whether or not the results from this week’s presidential election played a factor in the rate cut, Pincin said they didn’t.
“The presidential election and what the incoming Trump administration is at least planning, hasn’t affected how they are thinking about their monetary policy,” Pincin said.
One thing reportedly being planned is possible tariff increases, something Tom Smith, a finance expert, said could impact rates if put in place.
“You’re definitely going to get a situation where you could have upward pressure on prices which then might force the Fed to increase target rates again,” Smith said.
But Smith says in order to get a clearer picture of what lies ahead, we’ll have to wait and see which policies the new administration puts in place.
“We just have to be aware of how these policies unroll and what their potential impacts are,” Smith said.
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