What the latest interest rate cut means for you

Published: Updated:
The Federal Reserve held interest rates steady despite renewed pressure from President Donald Trump to make deeper cuts. Pictured here, a gold plated seal inside the Eccles Building, the place of the Board of Governors of the Federal Reserve System and of the Federal Open Market Committee. (Credit: Brooks Kraft/Corbis News/Getty Images via CNN)
(Credit: Brooks Kraft/Corbis News/Getty Images via CNN)

You may save some money now that the Federal Reserve has cut interest rates to nearly zero in hopes of boosting the economy amid the coronavirus pandemic.

The move was expected to help the stock market, but instead, it tanked Monday, plunging nearly 13 percent.

In a late afternoon news conference, President Donald Trump admitted the economy may be heading into a recession despite the rate cut.

“I think there’s a tremendous pent-up demand both in terms of the stock market and in terms of the economy,” Trump said. “Once this goes away, once it goes through and we’re done with it, I think you’re going to see a tremendous surge.”

What does it all mean for consumers?

“It’s meant more for businesses who are trying to maintain their cashflow during a time where they’re not able to sell as many products but they want to keep things running so they can keep people employed,” said Dr. Tom Smythe, economic and finance professor at Florida Gulf Coast University.

But the market did not react the way the Federal Reserve hoped. Monday’s plunge of nearly 3,000 points was the worst since October 1987, when the Dow fell more than 20 percent.

Job losses may be next if people aren’t out spending money.

Any benefit to consumers won’t be immediate.

The current credit card interest rate average is 17.3 percent. The interest rate cut could mean a half-percent drop, but the end result is that most people will only save two bucks on average.

As for mortgages, refinancing makes sense for some people, but not all. If you have a 4.5 percent rate on a $250,000 loan, you might be able to get it down to 3.5 percent.

“Does it make sense for you to refinance or not depends heavily on your current loan balance, your credit score, what is your current interest rate,” said Bob Vaughan, a loan originator with D&V Home Mortgage.

Copyright ©2023 Fort Myers Broadcasting. All rights reserved.

This material may not be published, broadcast, rewritten, or redistributed without prior written consent.