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The Curious Bag
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A Fed rate cut refers to a reduction of the prime lending rate by the Federal Reserve. Prime lending rates are sometimes cut by the Federal Reserve when an adjustment in the economic market is considered necessary.
Prime Lending Rate
The prime lending rate is the interest rate that banks use to make loans to their best and most reliable customers, usually businesses.
Fed Funds Rate
The prime lending rate is directly tied to the Fed funds rate, and the two are usually about the same. The funds rate is the rate that banks use when they lend money to each other.
Fed Rate Cut
A Fed rate cut can affect most of the economic market, from loans to the buying and selling of stocks. Fed rate cuts make it easier for consumers and businesses to take out loans at a lower interest rate.
Adjustable Rates
Fed rate cuts affect adjustable-rate loans, such as some mortgages, home equity lines of credit and credit card interest rates.
Fixed Rates
Fed rate cuts do not affect fixed-rate loans, such as some mortgages, car loans and student loans.
Source:
What does Fed rate cut mean for you?
What the Federal Rate Cut Means for Homeowners
Resource:
Federal Reserve
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