WASHINGTON — The Federal Reserve is meeting Tuesday and Wednesday, and a potential interest rate cut could be on the horizon. If it happens, it would be the first cut since 2020.
The expected reduction is a quarter of a percentage point, which could impact borrowers, particularly those looking to buy a home or manage floating-rate credit cards.
The move could also help with inflation, which peaked at nearly 9.1%, but has since slowed to 2%. However, unemployment is rising. An interest rate cut could stimulate the economy and help keep unemployment in check.
How will this impact consumers? WUSA9 spoke with Dr. George Morgan, Virginia Tech Truist Professor Emeritus of Finance about the implications of the potential rate cut. From his perspective, borrowers might want to wait for even better rates.
“Some of the impact will be related to things like mortgage rates," Morgan said. "As the Federal Reserve lowers rates, those tied to U.S. Treasury rates could already be affected. People with floating-rate mortgages or those looking to buy a home could see some benefits from the Fed’s actions.”
However, lower rates, even by a quarter of a percent might spur more people to buy homes quickly. As for overall prices and inflation, Morgan said most people will not perceive significant changes in the rate of increase in costs, and a 0.25% cut may not provide as much relief as some are hoping to see.