What the Fed's rate cut means for your mortgage, credit cards, and more

"The benchmark rate is the rate at which banks borrow and lend to one another, and the Fed has two goals when it sets the rate: one, to manage prices for goods and services, and two, to encourage full employment. The benchmark rate also affects the interest rates consumers pay to borrow money via credit cards, auto loans, mortgages, and other financial products."

"Typically, the Fed might increase the rate to try to bring down inflation and decrease it to encourage faster economic growth, including by boosting hiring. The challenge now is that inflation remains higher than the Fed's 2% target but the job market has cooled. The government shutdown had also prevented the timely collection and release of some data the Fed relies on to monitor the health of the economy."

"For savers, falling interest rates will continue to erode attractive yields currently on offer with certificates of deposit (CDs) and high-yield savings accounts.Three of the big five banks (Ally, American Express, and Synchrony) cut their savings account rates since the last Fed rate cut in October, according to Ken Tumin, founder of DepositAccounts.com. The top rates for high yield savings accounts right now remain around 4.35% to 4.6%."

The Federal Reserve lowered its benchmark interest rate by a quarter point to about 3.6%, the lowest level in nearly three years and the third cut since September. The benchmark rate determines interbank borrowing costs and influences consumer rates on credit cards, auto loans, mortgages and other products. The Fed balances price stability and full employment when setting the rate. Inflation remains above the 2% target while the job market has cooled, and a recent government shutdown delayed some economic data. Falling rates are reducing yields on CDs and high-yield savings accounts, though top offers remain around 4.35%–4.6%.

Read at Fast Company