A rate cut would reduce rates on credit cards, home equity lines and personal loans

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Fed cuts expectedbut size debated: Markets almost fully price in a 0.25 percentage-point rate cut at the Federal Reserve's September 1617 meeting, though a larger 50-bp cut now holds about a 14% probability.
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Reason for the shift: A weak August jobs reportwith only 22,000 positions added and rising unemploymenthas shifted the Feds focus toward supporting employment, even amid inflation concerns.
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Consumer impact: If the Fed cuts rates, consumers could see relief on short-term borrowing costs like credit cards and personal loansbut long-term rates like mortgages may respond sluggishly or remain influenced by bond yields, inflation, and broader economic forces.
The stage is set for the Federal Reserves next policy move at its September 2025 meeting next week, and market sentiment strongly suggests that rate cuts are imminent.
Investors and analysts are nearly unanimous in expecting a quarter-point (25-basis-point) rate cut. The CME Groups FedWatch tool and recent market signals show cut probability approaching certainty for that amount.
However, an unexpected half-point cut (50 basis points) is also in play. Markets suggest a roughly 14% chance of such an aggressive move amid intensifying concerns about a potential economic slowdown.
What fueled this shift?
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Soft Job Market: The August employment report delivered a blowjust 22,000 jobs added and rising unemployment. This has intensified pressure on the Fed to act in the name of labor stability.
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Inflation Still a Factor: While inflation remains above the Feds 2% target, recent data (e.g., jumps in producer prices) suggest that aggressive cuts may be unwarranted. Thus, a moderate approach the 25-bp cut is seen as most likely.
What it means for consumers
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Short-Term Borrowing Costs: A Fed rate cut translates to the prime rate and overnight bank interest rates, which influence credit cards, home equity lines, personal loans, and other variable-rate products. These could drop fairly quickly after a Fed move.
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Long-Term Loans (Mortgages, Auto Loans): Mortgage buyers may see less immediate benefit. Long-term interest rates are more tied to bond markets than to the Fed's benchmark rate. As a result, mortgage and auto loan rates may fall slowly or not at all, depending on broader economic dynamics.
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Spillover Benefits Over Time: Rate cuts can stimulate economic activity and borrowingeventually easing consumer costsbut the effects often unfold over several months to a couple of years.
Posted: 2025-09-09 13:22:28