The Federal Reserve has made its first interest rate cut since March 2020, reducing rates by half a percent and bringing the inflation rate to a range of 4.7% to 5%.
This move has already triggered a response from the economy, with falling rates on credit and mortgages. However, experts caution that this does not mean consumer prices will drop immediately.
“There’s a common misconception that when inflation decreases, prices will follow. In reality, the rate of price increases has slowed down, but prices themselves have not necessarily decreased,” explained Klajdi Bregu, associate professor of economics at Indiana University South Bend (IUSB).
Mortgage rates, which recently exceeded 7%, have now dropped to around 6%. Local real estate agents expect the market to become more active, with buyers finding new opportunities, whether through refinancing or entering the market for the first time.
“Buying a home with a mortgage is now significantly less expensive than it was just a month ago,” said John De Souza, president of Cressy & Everett Real Estate. He noted that rates have been steadily declining over the past month and are expected to decrease further.
While loans and mortgages are primary areas affected by the rate cut, small businesses are also expected to benefit. Unlike large corporations, which can secure long-term loans with fixed interest rates, small businesses tend to borrow over shorter periods and face more variable rates.
“This is good news for small businesses, which have been hit hardest by higher interest rates,” Bregu added.