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Fed cuts interest rate for the second time in 2019: What this means

Federal Reserve building in Washington, D.C.Image: Federal Reserve building in Washington, D.C.
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The interest rates you pay on certain loans or lines of credit may soon fall, thanks to the Federal Reserve.

Following its September meeting this week, the Fed cut the federal funds rate by 0.25% for the second time this year, to a rate between 1.75% and 2%. The move was expected even though the Fed cut rates earlier this summer and comes as economic uncertainty continues.

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This rate cut could mean now is a better time interest-wise to buy a car, refinance a mortgage, or take out a personal loan. But, if you’ve got a high-yield savings account, you may see the interest rate fall slightly, meaning your money would earn a bit less. Read on to learn more.

Want to know more?

Wait, didn’t the Fed just cut rates?

The Fed cut rates at its last meeting, in late July. But the concerns that led officials to cut rates about two months ago — including weakening global economies and the ongoing U.S.-China trade dispute — haven’t gone away, and have impacted the latest cut as well.

Even though the U.S. economy remains strong, officials believed it was a good idea to cut rates slightly to hedge against ongoing uncertainty, Fed Chair Jerome Powell explained following the latest rate cut.

Still, officials were divided over whether the current rate cut was necessary. Of 10 Fed officials, seven voted for the cut, while two voted to keep rates steady, and one voted for a steeper rate cut of 0.5%. Chairman Powell indicated that the central bank is prepared to keep rates steady or make steeper cuts in the future, depending on how global economic conditions and trade policies develop.

What could this latest rate cut mean for you?

Any loans or lines of credit you currently have may or may not be affected. It largely depends on whether you have a fixed or a variable APR. It’s a good time to check your loan terms to get an idea of whether you’ll see any change.

At the same time, if you’ve got a high-yield savings account, it’s possible you’ll see your bank lower the APY on that account, meaning your money may earn less in interest payments than it did before.

If you want to keep up with what the Fed has in store for interest rates in the future, you can follow its meeting calendar and statement releases.


About the author: Paris Ward is a content strategist at Credit Karma, providing readers with the latest news that will aid their financial progress. She has more than a decade of experience as a writer and editor and holds a bachelor’s… Read more.