In a bold move, the Federal Reserve has cut interest rates by half a percentage point, signaling that central bankers believe they are winning the battle against inflation. Local financial expert Barry Biglow from Great Waters Financial weighed in on what this decision means for the average consumer and the economy.

Biglow explained that the Federal Reserve uses rate cuts as a way to stimulate economic growth. With inflation coming down, the Fed feels confident enough to focus on boosting the economy.

“It’s a sign that they see inflation is under control enough that they can start to add to the economy,” Biglow said. He added that the Fed’s aggressive cut may have been in the works for months as inflation remained higher than desired, delaying their efforts to stimulate growth.

The rate cut will have a direct impact on consumers, according to Biglow. He highlighted three key areas:

1. Borrowing Money: Loan rates for houses, cars, and credit cards are expected to decrease in the coming weeks and months, making borrowing more affordable. “If you had a loan rate at 7% for a house, you may be able to refinance and get a lower payment, making life a little more affordable,” Biglow said.
2. Savings Rates: On the downside, Biglow warned that high-yield savings rates will likely start to decline. “If you regularly buy CDs, it might be time to lock in a longer time period because savings rates are expected to drop.”
3. Stock Market: The stock market responded positively to the rate cut, with investors optimistic about the economic growth it could spur. However, Biglow emphasized the importance of planning ahead. “Now is the time to make sure you have a plan. When the stock market is high, it’s time to put some hay in the barn for a rainy day.”

When asked about the possibility of future rate cuts, Biglow said it’s more likely that the Fed will cut rates again rather than raise them. “Going into the election, they’d rather add economic activity than battle inflation by raising rates again,” he said.

The looming question for many is whether this rate cut helps avoid a future recession. Biglow said it’s too early to tell. “There’s this term called a soft landing. Everyone’s sitting on the edge of their seats wondering, ‘Did we do it?'” Biglow said. “The reality is we won’t know for a few months.”

Biglow stressed the importance of making financial moves now to secure the future, especially in light of the rate cut and stock market gains.