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Impact of Federal Reserve interest rate cut for borrowers

Experts predict consumers should see lower interest rates on credit card bills before the November election.

CONNECTICUT, USA — The Federal Reserve announced this week that it is cutting its benchmark interest rate for the first time since 2020.

Rates are going down by half a percentage point, with many economists anticipating more cuts by the end of the year.

“For borrowers, it's positive,” Osman Kilic, finance professor at Quinnipiac University, said.

Experts predict consumers should see lower interest rates on credit card bills before the November election. 

"Your credit card debt and personal loans, everything is going to go down, so you will be saving some money,” Kilic said.

The Federal Reserve said the average credit card rate right now is 21.5%, and within the next month or two, that should start to decline. For perspective, in 2019, rates were 15%.

For those in the market to buy a car, rates will also be more affordable.

According to the Federal Reserve, the average auto interest rate is hovering around 8.2%. In 2019, it was 5.3%.

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Kilic warned that rate cuts do not necessarily spell good news for the overall economy.

“It seems to me is [the Fed] sees something that market does not expect,” he said. “A recession might happen in 2025."

He pointed to supply and affordability issues, especially within the housing market. Another factor is the rate of credit card delinquencies hitting a near 12-year high, according to a Philadelphia Fed report.

Kilic said the best thing Americans can do right now is save where they can and prepare for all possible scenarios.

“There’s going to be some type of slowdown, economic slowdown," Kilic noted. "The unemployment rate probably will go up to around 5% or so. If the inflation catches up again, we may end up having something called stagflation. If that happens, that's the worst outcome."

Mortgage rates were already on the decline prior to the Fed’s September meeting, and experts said that trend will likely continue in the coming months.

“But it is nowhere close to that 3%, 4%, even the 2% that we were seeing during pre-COVID and even COVID years,” Kilic said. "Many people have been living in their house for such a long time and they have a very low fixed interest rate.”

Bridgette Bjorlo is an anchor/reporter at FOX61 News. She can be reached at bbjorlo@fox61.com. Follow her on FacebookX and Instagram.

MORE NEWS: All Connecticut college students can get discounts at local Hartford businesses with new program

RELATED: Fed slashes interest rates in first cut since 2020

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