Federal Reserve rate cut: how it impacts your loans
An economics professor at UNA, explains that the recent interest rate cut by the Federal Reserve can save loan borrowers hundreds per year.
The recent cut in benchmark interest rates by the Federal Reserve could mean significant savings for loan borrowers. The interest rate was lowered by 0.25 percent on Wednesday.
Dr. Jason Imbrogno, an associate professor of economics at the University of North Alabama, explained that this reduction is beneficial for those with loans.
“Lower rates, certainly a good thing if you’re borrowing,” Dr. Imbrogno said.
For instance, a mortgage payment could decrease by about $15 per month for every $100,000 borrowed according to the economist.
However, Imbrogno warned that while borrowers benefit, savers might earn less due to these lowered rates. The change, he noted, is not significant enough to alter financial behaviors drastically.
“When they lower rates, it’s intended to spur economic activity because it induces people to do more borrowing,” said Imbrogno. “If you’re starting a new business and you need a loan to do it, and you couldn’t do it at a higher rate, but at a lower rate it becomes worth it, now you go ahead and you open that new business.”
While Dr. Imbrogno explained inflation may begin to creep with with interest rates going down, the Federal Reserve stated that its goal remains to achieve maximum employment and maintain inflation at 2 percent over the long term.
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