Smart Borrower Blog

Fed Makes First Rate Cut in a Decade

Jul 31st, 2019 @ 9:17 PM by Amber Nelson

The Federal Reserve voted today to lower its target interest rate by 25 basis point to a range of 2% to 2.25%, the first rate cut in 11 years.

The Fed’s Federal Open Market Committee (FOMC) found that “the [U.S.] labor market remains strong and that economic activity has been rising at a moderate rate,” but because of “the implications of global developments for the economic outlook as well as muted inflation pressures” it decided to preemptively cut rates. It seems the FOMC is concerned about future fallout from the U.S.-China trade war, Brexit and other global economic troubles.

However, Federal Reserve Chairman Jerome Powell said that the FOMC does not foresee a serious downturn that would require extensive rate cuts.

He indicated that lowering the rate range today was just a “midcycle adjustment” and the FOMC would only cut rates in the future “as appropriate to sustain the expansion, with a strong labor market and inflation” around 2%.

The last time the FOMC lowered rate was in December 2008, at the beginning of the Great Recession. At that time, it cut its target rate from 1% to the range of 0% to 0.25% and did not begin to raise it until 2015.

The Federal Funds rate affects most consumer credit interest rates. Everything from auto loans to mortgages to credit cards could see rates decrease after this FOMC move.

Long-term mortgage interest rates have already been sliding for most this year in anticipation of a Fed rate cut. The average rate on a 30-year fixed-rate mortgage as of last week was 3.75% with 0.5 point, according to data from mortgage backer Freddie Mac.

Borrowers could see interest rates fall slightly in the coming weeks. Those looking to buy a home or refinance their mortgages could end up saving a little more in the wake of the FOMC decision.

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

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