Don't hold your breath waiting for a lower mortgage rate or auto loan after the Fed cut, analyst says: 'Unlikely to make a noticeable difference' | Fortune

"The Fed has two goals when it sets the rate: one, to manage prices for goods and services, and two, to encourage full employment. This is known as the "dual mandate." Typically, the Fed might increase the rate to try to bring down inflation and decrease it to encourage faster economic growth and more hiring. The challenge now is that inflation is higher than the Fed's 2% target but the job market is weak, putting the Fed in a difficult position."

"The federal funds rate, set by the Federal Reserve, is the rate at which banks borrow and lend to one another. While the rates that consumers pay to borrow money aren't directly linked to this rate, shifts in Fed policy affect what people pay for credit cards, auto loans, mortgages, and other financial products. Wednesday's quarter-point cut is the first since December and lowers the Fed's short-term rate to about 4.1%, down from 4.3%."

"For prospective homebuyers, the market has already priced in the rate cut, which means it's "unlikely to make a noticeable difference for most consumers at the time of the announcement," according to Bankrate financial analyst Stephen Kates. "Much of the impact on mortgage rates has already occurred through anticipation alone," he said. "(Mortgage) rates have been falling since January and dropped further as weaker-than-expected economic data pointed to a cooling economy.""

The Federal Reserve cut its benchmark federal funds rate by a quarter-point to about 4.1% from 4.3%, marking the first reduction in nine months and projecting two additional cuts before year-end. The federal funds rate influences borrowing costs for credit cards, auto loans, mortgages and other consumer credit products. Inflation remains above the 2% goal while the labor market has cooled, creating tension between price stability and full employment under the Fed's dual mandate. Mortgage rates have fallen since January as markets anticipated the cut, so immediate consumer relief may be limited, with effects unfolding gradually.

Read at Fortune