The Federal Reserve announced this afternoon that it would slash its benchmark interest rate by a quarter point, as expected, in an effort to extend the economic boom and boost weak inflation, reports Axios' Courtenay Brown.
- Why it matters: It's the first cut in over a decade. While previous Fed regimes have cut rates when the economy was not in the throes of a recession, the decision will likely be seen a legacy-shaping milestone in Jerome Powell's tenure as Fed chairman.
The big picture: Bloomberg calls the decision an "event with the ability to shape the outlook for the global economy this year," capping off "what might be the busiest week for the world economy this year."
- "Fed officials see tighter linkages than in the past between U.S. and global economies, prompting new questions over how high they can raise domestic rates above those in other advanced economies, which have lower or even negative rates," writes The Wall Street Journal (subscription).
- Speaking to reporters at a press conference, Powell scaled back market-watchers' expectations that today's decision could kick off a series of cuts.
- Stock prices fell throughout the presser, but regained some ground before markets closed. However, the Dow still finished down 333 points, while the S&P fell 1.19% and the Nasdaq dropped 1.1%.
What it means for you: An isolated rate cut won’t have the same impact on your everyday life as a consistent series of cuts would.
- Tightening cycles — or a series of rate cuts — benefit borrowers, not savers.
- Some borrowing rates (think: mortgages or car loans) may drop a tad, but so will the amount you get by keeping money in savings accounts. A handful of banks already chopped interest rates on their savings accounts ahead of the Fed's move.
- Credit card rates likely will not fall, despite a record-high for their interest rates.