[ad_1]
Don’t expect ‘immediate relief’ from the Federal Reserve’s first rate cut in years, economist says. Here’s why
Recent signs of cooling inflation are paving the way for the Federal Reserve to cut rates when it meets next week, which is welcome news for Americans struggling to keep up with the elevated cost of living and sky-high interest charges.
“Consumers should feel good about [an interest rate reduction] but it’s not going to deliver sizable immediate relief,” said Brett House, economics professor at Columbia Business School.
Inflation has been a persistent problem since the Covid-19 pandemic, when price increases soared to their highest levels in more than 40 years. The central bank responded with a series of interest rate hikes that took its benchmark rate to the highest level in decades.
The spike in interest rates caused most consumer borrowing costs to skyrocket, putting many households under pressure.
More from Personal Finance:
The ‘vibecession’ is ending as the economy nails a soft landing
‘Recession pop’ is in: How music hits on economic trends
More Americans are struggling even as inflation cools
“The cumulative progress on inflation — evidenced by the CPI now at 2.5% after having peaked at 9% in mid-2022 — has given the Federal Reserve the green light to begin cutting interest rates at next week’s meeting,” said Greg McBride, chief financial analyst at Bankrate.com, referring to the consumer price index, a broad measure of goods and services costs across the U.S. economy.
However, the impact from the first rate cut, expected to be a quarter percentage point, “is very minimal,” McBride said.
“What borrowers can be optimistic about is that we will see a series of rate cuts that cumulatively will have a meaningful impact on borrowing costs, but it will take time,” he said. “One rate cut is not going to be a panacea.”
[ad_2]
Source link