Cheaper mortgages and car loans: Lower interest rates in sight

The cost of 30-year mortgages and new car loans has fallen slightly in recent months – welcome news for borrowers who have suffered years of high prices and high interest rates.

These borrowing costs are likely to fall even further: The US Federal Reserve is expected to cut its key interest rate on Wednesday, and its officials are likely to announce further cuts.

When the Fed cuts its benchmark interest rate, it is ultimately trying to lower borrowing costs for businesses and consumers. Setting interest rates is one of the main ways the Fed can try to stimulate or cool the economy. This can include what lenders offer to prospective homeowners, car buyers, and other consumers.

The announcement, expected on Wednesday, will be the first rate cut in more than four years, after the Fed long struggled to contain the rise in inflation triggered by pandemic-related supply chain bottlenecks and other factors.

As the Fed fought inflation, borrowing costs reached a 20-year high.

The Fed's decision to change interest rates is influenced by a number of factors, including the strength of the labor market. Hiring has been strong across much of the U.S. economy in recent months, wages continue to rise, and many Americans remain willing to work.

However, unemployment is slowly rising and wage growth has also slowed.

This raises the question of whether the Fed waited too long before starting to cut interest rates. It has also increased many people's fears about the state of the economy.

Even though inflation has eased, months of rapid price increases have left lasting marks on many consumers. And the costs of many household items, expensive purchases and important services remain high for many people.

While Wednesday's news is likely to provide relief to shoppers and borrowers, the impact of the Fed's rate changes will not be felt immediately and it could be months before credit card annual percentage rates, mortgage loan costs and other interest rates change significantly.