The former CEO of St. Louis Federal Reserve James Bullard reveals rate cuts and the labor market in ‘The Claman Countdown.’
Wall Street and Main Street are hoping to usher in the fall season with the first interest rate cut since March 2020, the start of the COVID-19 pandemic, and this time comes the hope of lower borrowing costs.
While it may lower mortgage rates, auto and personal loans, those with credit card debt may be out of luck.
“That’s where the real advice is. Don’t expect the Fed to come to the rescue”, Ted Rossman, Senior Industrial Analyst at Bankrate, told FOX Business. “The change won’t be that big. My other big point is that a quarter point, a half point, even if credit card rates go down a few points, it’s not that much of a difference. Because the rates are so high,” he warned.
A person inserting or removing a Visa Credit Card using a touch screen credit card payment at a Five Guys restaurant in Queens, New York. (Photo by: Lindsey Nicholson/UCG/Universal Images Group via Getty Images)
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The average annual percentage rate on standard credit cards is 20.76%, according to Bankrate, with store cards, such as Bloomingdale’s, as high as 31.99%.
Federal Reserve Chairman Jerome Powell, in August at the Kansas City Federal Reserve’s Jackson Hole Economic Symposium, set the stage for a September rate cut.
Jerome Powell, chairman of the US Federal Reserve, second right, arrives at a dinner during the Jackson Hole Economic Forum in Moran, Wyoming, US, Thursday, Aug. 24, 2023. (Photographer: David Paul Morris/Bloomberg via Getty Images / Getty Images)
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“The time has come for the policy to be adjusted,” said Powell. “The path forward is clear, and the timing and speed of rate reductions will depend on incoming data, the evolving outlook, and the balance of risks,” he added.
Ahead of the meeting, most market participants, or more than 60%, now expect a 50 basis point cut with just 37% expecting a 25 basis point drop, as tracked by CME’s FedWatch Tool, which measures the likelihood of future rate moves. .
| A ticker | Security | Finally | Change | Change % |
|---|---|---|---|---|
| M | Company MACY’S INC. | 15.03 | +0.06 |
+0.40% |
| V | Company VISA INC. | 291.69 | +1.24 |
+0.43% |
| JPM | JPMORGAN CHASE & CO. | 209.44 | +1.49 |
+0.71% |
| DFS | GET FINANCIAL SERVICES | 137.64 | +3.74 |
+2.79% |
| COF | CAPITAL ONE FINANCIAL CORP. | 145.11 | +4,12 |
+2.92% |
As an example, for those carrying a $1,000 balance on a credit card, a 50-point reduction could lower your APR to 20.26% versus 20.76%, according to Bankrate estimates. The decrease in monthly financing will be slightly lower by $0.42. Your down payment may remain the same, as explained by Greg McBride, senior financial analyst, Bankrate.
A 25-point rate cut could lower your APR to 20.51% versus 20.76%, according to Bankrate estimates. The decrease in monthly financing will be $0.21 less.
Even if policymakers stick to the reduction cycle, it will still take a few cycles to make a meaningful difference.
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“The Fed is going to be much slower, we think, on the way down than they were on the way up,” Rossman warned.
Instead of waiting for the Fed, Rossman suggests exploring other options.
“Either get a 0% balance transfer card or hold on to the chaos. Lower your costs. I mean, there are other things you can do, but lowering feed rates, by itself, isn’t going to make a huge difference in that. credit card world.”
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The Fed will meet again in November and December to finish the year 2024.
*This article, originally published on September 1, 2024 has been updated.