The Federal Reserve just cut interest rates by a half point. Here’s what that means for your wallet

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The Federal Reserve announced Wednesday it will lower its benchmark rate by a half percentage point, or 50 basis points, paving the way for relief from the high borrowing costs that have hit consumers particularly hard. The federal funds rate, which is set by the U.S. central bank, is the interest rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the borrowing and savings rates they see every day. Wednesday’s cut sets the federal funds rate at a range of 4.75%-5%. A series of interest rate hikes starting in March 2022 took the central bank’s benchmark to its highest in more than 22 years, which caused most consumer borrowing costs to skyrocket — and put many households under pressure. Now, with inflation backing down, “there are reasons to be optimistic,” said Greg McBride, chief financial analyst at Bankrate.com. However, “one rate cut isn’t a panacea for borrowers grappling with high financing costs and has a minimal impact on the overall household budget,” he said. “What will be more significant is the cumulative effect of a series of interest rate cuts over time.” More from Personal Finance:The ‘vibecession’ is ending as the economy nails a soft landing‘Recession pop’ is in: How music hits on economic trendsMore Americans are struggling even as inflation cools “There are always winners and losers when there is a change in interest rates,” said Stephen Foerster, professor of finance at Ivey Business School in London, Ontario. “In general, lower rates favor borrowers and hurt lenders and savers.” “It really depends on whether you are a borrower or saver or whether you currently have locked-in borrowing or savings rates,” he said. From credit cards and mortgage rates to auto loans and savings accounts, here’s a look at how a Fed rate cut could affect your finances in the months ahead.