What the Federal Reserve rate cut means for you

Core Points - The Federal Reserve has cut its benchmark interest rate by a quarter point for the third time since September, bringing it to approximately 3.6%, the lowest in nearly three years [1] - The Fed's dual goals in setting the benchmark rate are to manage prices and encourage full employment, which also influences consumer borrowing rates [2] - Inflation remains above the Fed's 2% target while the job market has cooled, complicating the Fed's decision-making process [3] Impact on Savings and Loans - Falling interest rates will continue to reduce yields on savings accounts, affecting the attractiveness of certificates of deposit and high-yield savings accounts [3] - Major banks like Ally, American Express, and Synchrony have already reduced their savings account rates since the last Fed cut, with top rates for high-yield savings accounts around 4.35% to 4.6% [4] - The national average for traditional savings accounts is currently 0.61%, indicating a significant difference compared to high-yield options [5] Mortgage Market Outlook - The mortgage market has already priced in the recent rate cut, with current mortgage rates at their lowest levels in over a year [5] - Mortgage rates are influenced by bond market expectations regarding the economy and inflation, typically following the 10-year Treasury yield [6] - There is optimism that homebuyers may see mortgage rates drop below 6.00% in the next year, potentially encouraging refinancing and new home purchases [7]