The bigger-than-expected cut in interest rates by the United States Federal Reserve may have sent the stock market cheering, but its impact on the economy, and the upcoming presidential election, is mixed, experts say.
The US Fed on Wednesday cut the benchmark federal funds rate by half a percentage point to the 4.75 percent to 5 percent range “in light of the progress on inflation and the balance of risks”, the rate-setting committee said in a statement.
The rate had been in the 5.25 percent to 5.5 percent range since July 2023.
Since then, inflation – which hit a 40-year high of 9.1 percent in mid-2022 – has been inching its way down and is now at 2.5 percent, within spitting distance of the Fed’s target of 2 percent.
While the cut was bigger than expected, most US mortgage holders will see no benefit as more than 90 percent of borrowers have fixed-rate loans.
For households with variable-rate mortgages or student loans, relief will take some time, as the terms of repayment typically reset only once every six months or a year.
Some of the biggest beneficiaries of the rate cut will be prospective homebuyers.
The average rate on a 30-year fixed-rate mortgage last week fell to 6.09 percent from a high of nearly 8 percent last October, according to Freddie Mac, fuelled by expectations of lower interest rates.
“The Fed was more aggressive than we expected and that might translate into mortgage rates coming down a bit more as more cuts are due later in the…
