HOUSTON – September is almost here and the financial market is speculating about potential interest rate cuts.
Federal Reserve Chair Jerome Powell spoke at the Kansas City Federal Reserve Summit in Jackson Hole, Wyoming, on Friday, hinting at the possibility of a rate cut soon.
Under Powell, the Fed raised its benchmark rate to the highest level in 23 years to subdue inflation that two years ago was running at the hottest pace in more than four decades. Inflation has come down steadily, and investors now expect the Fed to start cutting rates at its next meeting in September.
“My confidence has grown that inflation is on a sustainable path back to 2%,” Powell said.
KPRC 2 spoke with financial expert and CEO of Breakthrough Mavens Mark Madrid about the impact on us.
Impact on Borrowing Costs
For consumers and small businesses, Madrid said a rate cut could bring significant relief.
“This means lower interest rates on loans and credit cards, making it more affordable to finance big purchases or interest or invest in business growth. That’s the bottom line. We want to feel it on the ground,” Madrid explained.
Home Prices and Mortgages
If the Fed proceeds with rate cuts, Madrid said homebuyers could find new opportunities like more affordable mortgages.
“The actual impact, and this is important, on home prices, will depend on various factors... and we all know it can be unpredictable, but the most important thing to know is that home prices and mortgage rates will be more affordable on the horizon,” Madrid said.
Refinancing Opportunities
For homeowners and those with car loans, Madrid said refinancing could be a smart move if rates are reduced.
He also mentioned the potential risks consumers should be aware of as interest rates decrease.
“I always say no one can take your education from you. So depending on your horizon, where you are with your, credit card, your portfolio, and how large it is. You want to talk to your banker, you want to talk to your financial advisor about your particular situation. For some, refinancing might be the best move. For others, we might hold for further interest rate cuts,” Madrid explained.