Federal Reserve cuts interest rates amid labor market concerns
The causing a surge in the stock market, as the Central Bank's chairman cited concerns about the labor market.
Federal Reserve Chairman Jerome Powell said, "We see the revisions and we see the new numbers, and I don't want to put too much emphasis on, on payroll job creation. But it's just one of the things that suggests that the labor market is really cooling off."
Experts caution that the effects of the rate cut on credit cards, car loans, and home loans will not be immediate. The Federal Reserve primarily influences short-term lending between banks, and changes take time to impact the broader economy. Powell himself acknowledged that a single rate cut does not significantly alter borrowing costs.
Mortgage rates were already declining before the Federal Reserve's announcement, but they do not always align with the Fed's actions. Last year, mortgage rates increased following a rate cut. Car loans tend to follow the Fed rate, potentially easing in the weeks after a rate change, though the reduction is typically small and dependent on individual credit scores. Credit card rates also track the Fed, but changes may take a billing cycle or two to appear, with current rates around 20% offering minimal savings.
Martin Lynch, president of the said, “Consumers’ expectations when it comes to credit card rates have to be tempered a bit, because it usually takes more than a single rate cut for them to see a reduction in their current rates.”
Experts say what matters more is the direction of rates, as a series of cuts could shape borrowing costs more significantly than a single move.
said it may be a good time to assess your current loans and see if refinancing debt is a good option.
"These are sort of moves that come down to sort of the micro level. You know, what is your personal situation like? But with rates moving down, opportunities may become available, and that's what people should be aware of," Kates said.
Powell indicated that the Federal Reserve's target rate by the end of the year is lower than the current rate, suggesting more cuts could be forthcoming.
President Donald Trump has criticized the Federal Reserve for not lowering interest rates sooner and has threatened to fire Federal Reserve Governor Lisa Cook, although this effort was recently struck down by the court. Removing a governor would be unprecedented, as the Federal Reserve is an independent agency.
Powell attributed the labor market concerns to a lack of immigrant workers and strong immigration policies, noting a sharp drop in both supply and demand for workers, which reflects a lack of immigrants.
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