Impact of the Federal Reserve’s interest rate cut

The Federal Reserve is making its first interest rate cut since March 2020.

The cut represents a decrease of half a percentage point and lowers the inflation rate to a range of 4.7 to 5 percent.

The economy is already reacting to today's reduction in the key interest rate.

Officials say that while interest rates – including loan and mortgage rates – are falling, the common misconception is that prices will also fall.

“But that doesn't mean that prices will fall or have fallen. It means that the rate of increase has slowed down. And that's why people often get confused, because when we say that inflation has fallen, some people expect that to mean prices. That's something different,” said Klajdi Bregu, associate professor of economics at IUSB.

According to official figures, mortgage rates have already fallen from over 7% to 6%

Real estate agents in the area say the market is likely to become more active due to the rate cut, opening up many options, whether it be refinancing a mortgage or for people entering the real estate market as first-time buyers.

“Interest rates have come down quite a bit in the last month and are likely to continue to come down a little further. That means buying a home with a mortgage is now significantly more affordable than it was a month ago,” said John De Souza, president of Cressy and Everett Real Estate.

According to experts, loans and mortgages are just one of the areas affected by the interest rate cut.

Note that the impact on small businesses is likely to be felt most strongly.

“Big companies can borrow money for longer periods, and they can sort of fix the interest rates, or they can borrow for 10 years and so on. But for small companies, the interest rates are usually very variable because they borrow more short-term. So that definitely has an impact on small companies' borrowing, which is positive because they are the ones most affected by these higher interest rates,” Bregu said.

According to experts, it is important to know the state of your finances and how your actions may affect you before making a decision.