Explainer: Federal Reserve's expected interest rate cut

Economists expect the Federal Reserve to announce a 0.25% interest rate cut at the conclusion of its two-day meeting this week. Wednesday’s announcement aims to stabilize the economy by addressing inflation and employment concerns. The Federal Reserve’s job is to promote monetary policy to stabilize the economy. The independent agency adjusts interest rates to maintain prices, inflation, and keep people employed. Often, the Fed plays a careful balancing game. If it raises interest rates too quickly and too high, it could lead to slowed consumer spending and a hit to the economy. At the same time, if it lowers interest rates too quickly, inflation could spike back up.Last month, the government reported that inflation currently stands at around 2.9%, above the Fed’s ideal target of 2%, which normally would incentivize the Fed to keep interest rates up. Higher interest rates slow consumer spending, keeping inflation and prices down.The Federal Reserve, however, is also watching the jobs market, where there are signs of slowing, suggesting cooled consumer spending and hiring. Based on the data, experts believe the Fed is leaning towards a rate cut, which would make borrowing money cheaper, reduce interest rates on credit cards, lower car loan costs, and make mortgage rates more affordable. This move is seen as a way to re-stimulate the economy at a time when financial stress has more than doubled since 2021, according to a report from the National Foundation for Credit Counseling (NFCC).”We’ve gone from 3.2 in 2021, which is a relatively stress free existence for most consumers, to a 6.6 in the second quarter of this year, meaning it’s more than doubled over a very short period of time,” Bruce McClary from the NFCC said. “What that tells us is it’s dominating decisions each day, and it’s leading to sometimes very painful sacrifices that consumers are having to make just to get by.”Data gathered by our Get the Facts Data Team shows the direct ripple effect of the Fed’s rate changes. As interest rates climbed in the Spring of 2022, rates for mortgages, cars, personal loans, and credit cards also began to rise.Pressure from President Donald Trump has threatened the independence of the Federal Reserve. On Monday, a federal judge blocked the president’s attempt to fire Fed Governor Lisa Cook, and the Senate confirmed Stephen Miran, a Trump appointee. Experts view Miran’s appointment as part of President Trump’s pressure campaign on the Fed, aiming to align board members with his goal of cutting rates. Experts say the President’s interference could damage the Fed’s independence and credibility, spooking investors and the market.Watch the latest on the Federal Reserve, inflation and interest rates:

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