Federal Reserve expected to cut interest rates, but will it make a difference for the average American?

The Federal Reserve is meeting this week to discuss whether to lower the federal fund rate for the first time since December of 2024. 

The decision will be announced Wednesday at 1 p.m. CST. Many economists and experts are expecting the Fed will approve an interest rate cut this week.

A popular tracking tool, CME FedWatch, says there is a 96% chance the Fed will approve a 0.25% cut, and a 4% chance the Fed will approve a 0.5% cut.

University of Saint Thomas Economics Professor Tyler Schipper agrees that a rate cut is almost a guarantee.

“This was a decision that was telegraphed by Jerome Powell when he recently spoke at an annual monetary policy meeting and he talked about how monetary policy would need to change directions a little bit,” Professor Schipper said.

A potential rate cut would affect many Americans in different ways, both directly and indirectly.

Americans who are paying off credit card debt could see some relief fairly quickly as Schipper says credit card rates are directly connected to the federal fund rate.

However, Schipper said mortgage rates are more indirectly impacted by the federal fund rate, because mortgage rates are more connected to the 10-year Treasury interest rate.

“We might see some changes in mortgage rates and some downward pressure would be great for people who are trying to buy or sell homes, but it won’t be as direct or as immediate as the credit card rates,” Schipper said.

It’s difficult to say whether a 0.25% rate cut will make a meaningful difference for the average American household.

Americans who are struggling with credit card debt may not notice a 0.25% change on their bill, when many credit card borrowers are paying an interest rate that is higher than 20% on their credit card bills.

The most significant impact from a rate cut could be on business owners who may see a 0.25% rate cut as a great opportunity to expand their business and to create new jobs.

“There is always some business where it doesn’t make sense right now and 25-basis points is enough to make it make sense,” Schipper explained.

“Now, is 25-basis points enough to fix everything that’s wrong with the economy? Absolutely not. We will need to see future rate cuts to stave off a future recession.”