Fed October rate cut: What to know
The Fed chose to lower the federal-funds rate by a quarter of a percentage point, following a quarter-point cut at its previous meeting in September. The September cut was the Fed’s first since December 2024.
The Fed is tasked with keeping both inflation and unemployment low, and the federal-funds rate is one of its primary tools for doing so. Because the labor market has started to show signs of weakening, investors believe central bankers will lower rates a few more times at future meetings. However, inflation heated up slightly last month. If prices continue to accelerate, policymakers might not be able to lower rates as much as is currently expected.
Market reaction and implications
Immediately following the announcement, stocks and Treasury yields rose. In its statement elaborating on the rate cut, the Fed acknowledged both the cooling labor market and higher inflation.
“Job gains have slowed this year, and the unemployment rate has edged up but remained low through August; more recent indicators are consistent with these developments,” the statement read. “Inflation has moved up since earlier in the year and remains somewhat elevated.”
As markets continue to digest the rate cut and interpret Fed Chair Jerome Powell’s press conference commentary, consumers might see interest rates on certain financial products fluctuate. However, because this move was anticipated, many institutions have already priced it into their rates.
What does the announcement mean for borrowers, savers and investors?
Borrowing
Rose Krieger, a senior home loan specialist at Churchill Mortgage, says she often gets calls from borrowers when the Fed cuts rates, asking if mortgage rates are lower as a result.
Mortgage rates do typically move in response to changes to the federal-funds rate, but it’s not the only factor that goes into determining these rates. Inflation and unemployment, Krieger says, also play a big role. Higher inflation typically leads to higher mortgage rates, while higher unemployment can help rates come down.
Mortgage rates have dropped substantially in recent months. Average 30-year rates started the year just above 7%, according to Freddie Mac, but last week they were down to 6.19%. If the Fed continues lowering its benchmark rate, mortgage rates could decline further.
Heloc rates and home equity loan rates can also be impacted by changes to the federal-funds rate, Krieger says. If you have an existing Heloc, you could see your rate go down soon, since Helocs have variable rates. Rates on existing home equity loans won’t drop, but if you’re planning to apply for one of these loans, you might benefit from slightly lower rates.
Interest rates on other loan products, such as personal loans, could drop as well. Credit card APRs can also tick down with Fed cuts, but don’t expect a huge decrease.
Savings
Derik Farrar, head of everyday banking and borrowing at U.S. Bank, says that because the likelihood of a Fed cut was so high, many financial institutions already lowered rates on their savings products in anticipation of Wednesday’s announcement. Those that haven’t will likely start adjusting their rates now that the cut is official.
This means that if the rate on your high-yield savings account hasn’t already gone down, you’ll likely see that happen soon.
Farrar also says that compared to savings accounts, CD rates have experienced a more rapid drop in response to Fed cut expectations. This is because CD rates are locked in for a set period of time, while savings account rates can fluctuate in response to market moves.
Investments
Investors closely parse the commentary that comes out of each Fed meeting, tracking small wording changes in the statement issued and reacting in real time to revelations from Powell’s press conference.
Whether your investments are impacted by this latest Fed cut depends on how markets react and the types of assets you own. Following the last Fed cut in September, stocks were mixed at first before rising in the days after the announcement. Bond yields, on the other hand, often fall when the Fed lowers rates, though longer-term yields might not feel as much of an impact.
What should consumers do after the Fed’s October announcement?
Lower mortgage rates could provide an opportunity for both homeowners and homebuyers to save. Krieger says homeowners who refinance might be able to save a few hundred dollars a month on their mortgage payments.
“For those people who bought homes in the last few years, their rate might be as high as 8%—they are typically in the upper sevens,” Krieger says. “If we can refinance a whole percentage [point] lower, that’s going to help get their payment down.”
If you’ve been waiting to buy a house, now might be the time to start the process. Krieger warns that there’s no guarantee that mortgage rates will continue to drop, and home prices are likely to continue rising. Buying now lets you take advantage of today’s home prices, and you can refinance if rates drop in the future.
You might also want to revisit your savings strategy now that interest rates are going down. If you have money in a high-yield savings account, transferring some of it into a CD to lock in current rates could be a smart move, depending on the rates available to you.
Additionally, Farrar recommends exploring whether you’re making the most of your relationship with your bank.
“Are there relationship bonuses, are there offers that might not be available to the general public?” Farrar says. “It never hurts to ask.”
What does the Fed’s October stance mean for the rest of the year?
For now, traders are betting that we’ll get one more rate cut this year when the Fed meets in December, and they’re pricing in at least a couple more cuts in 2026 as well, according to CME FedWatch.
However, Fed statements have repeatedly emphasized that policymakers base their decisions on the latest economic data. This means we can’t know for certain what the Fed will do until we see more data showing how the economy is faring. This is particularly important to keep in mind given that U.S. trade policy is still shifting, which could impact economic growth and inflation.
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