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| Fed Chair Jerome Powell could announce the first rate cut of the year. Kent Nishimura/Getty Images |
The Federal Reserve is preparing to cut interest rates for the first time this year, a move that could ripple across credit cards, mortgages, car loans, and savings accounts. The decision, expected at the Fed’s September meeting, comes after months of economic signals showing slowing job growth, rising unemployment, and inflation creeping upward.
Markets are already pricing in a near-100% chance of a cut, according to CME FedWatch. Yet while the move may provide some relief for borrowers, experts caution it’s not a sign of economic strength but rather a response to a faltering recovery.
Why the Fed Is Considering a Cut
Chair Jerome Powell has faced heavy political pressure from President Donald Trump, who has repeatedly criticized the Fed for keeping rates too high. Still, Powell insists the central bank’s decisions are guided by its dual mandate: maintaining maximum employment and stable prices.
In his keynote at Jackson Hole last month, Powell acknowledged that “with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.” His comments signaled that the Fed was preparing to act after months of holding steady.
Economic data backs that view. The consumer price index rose 2.9% year-over-year in August, the highest reading since January. Job creation has slowed sharply, with July and August both coming in weaker than expected, and June revised into negative territory — the first monthly job loss since 2020.
What It Means for Borrowers and Savers
If the Fed cuts rates, borrowing costs could begin to ease — though analysts emphasize the effect will be limited at first.
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Mortgages: 30-year fixed rates have already been cooling in anticipation of a cut, but a single move won’t dramatically lower costs. Sustained cuts would have a greater impact on affordability.
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Auto loans and credit cards: Rates may drop slightly, but it often takes months or several billing cycles for consumers to see the changes on statements.
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Savings accounts and CDs: While borrowers may benefit, savers will likely see lower yields on high-yield accounts and certificates of deposit.
“This isn’t the victory parade over conquering inflation,” said Bankrate analyst Stephen Kates. “It’s a cut because the economy is faltering — and that’s not necessarily a good thing.”
Mark Hamrick, Bankrate’s senior economic analyst, added that a 25-basis-point cut “would not have hugely consequential implications” on its own, but if it marks the start of a sustained reduction campaign, it could meaningfully ease headwinds and boost the housing market.
The Political Pressure Factor
Trump has been unrelenting in his push for rate cuts, even calling Powell “Jerome ‘Too Late’ Powell” on Truth Social and suggesting he should resign. The president has also targeted other Fed officials, including Governor Lisa Cook, while nominating allies such as Stephen Miran to vacant board seats.
These moves underscore the political stakes around monetary policy. Economists warn that sudden changes in Fed leadership would rattle markets, but Trump’s influence through new appointments could gradually tilt the Fed’s direction over time.
What Comes Next
For consumers, the September cut — if it happens — won’t immediately transform borrowing or savings rates. But it could mark the beginning of a broader shift, one that makes debt more affordable while pressuring savers with weaker returns.
For policymakers, the challenge will be balancing inflation risks with the need to support a slowing labor market. And for the Fed, the bigger test may be whether it can make these decisions free of political interference, even as pressure from the White House grows louder.
