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The Federal Reserve has lowered the for the first time this year, dropping the benchmark indicator 25 basis points to a range of 4.00% to 4.25%.
Following three reductions late in 2024, rates remained in the 4.25%–4.50% range throughout much of 2025.
The highly anticipated move comes after government reports showing both more modest inflation pressure and a weaker job market.
While the Fed doesn’t directly control interest rates, it does determine what banks can charge each other when borrowing or lending excess reserves overnight. That, in turn, influences interest rates on everything from car loans to credit cards.
The committee will meet again in October and December, and a majority of economists anticipate at least one more cut before the New Year, possibly more, according to a recent Bloomberg survey.
How to take advantage of the Fed rate cut
Lowering the fed fund rate impacts the cost of borrowing and manifests in interest rates on credit cards, auto loans, mortgages and more. It also influences the yields savers receive on CDs, high-yield savings accounts and money market accounts.
“It affects everything a little differently and in different magnitudes,” said Amy Hubble, principal investment advisor with Radix Financial.
With that in mind, here are some financial steps to take to best benefit from today’s rate cut — and any more to come.
1. Pay off high-interest credit cards
Today’s news may sound like a boon for consumers with big credit card bills, but a quarter-point reduction might only lower your APR by about half a percentage point.
Instead of waiting for more cuts, consider opening a 0% intro APR balance transfer card to give yourself more time to pay off your balance interest-free.
The Wells Fargo Reflect® Card can help you save on interest charges thanks to its extra generous intro-APR offer on purchases and balance transfers.
Highlights
Highlights shown here are provided by the issuer and have not been reviewed by CNBC Select’s editorial staff.
- Select Learn More to take advantage of this offer and learn more about product features, terms and conditions.
- 0% intro APR for 21 months from account opening on purchases and qualifying balance transfers. 17.24%, 23.74%, or 28.99% Variable APR thereafter; balance transfers made within 120 days qualify for the intro rate, BT fee of 5%, min $5.
- $0 Annual Fee.
- Up to $600 of cell phone protection against damage or theft. Subject to a $25 deductible.
- Through My Wells Fargo Deals, you can get access to personalized deals from a variety of merchants. It’s an easy way to earn cash back as an account credit when you shop, dine, or enjoy an experience simply by using an eligible Wells Fargo credit card.
Balance transfer fee
Foreign transaction fee
At 21 months, the Wells Fargo Reflect® Card has one of the longest introductory 0% APR periods for purchases and balance transfers we’ve found. (After that, a variable 17.24%, 23.74% or 28.99% APR applies).
Balance transfers made within 120 days qualify for the intro rate, but keep in mind that the balance transfer fee on the Reflect Card is 5% of each transfer (with a minimum of $5). Additionally, you should prioritize paying off the full balance quickly or you could be stuck with an even higher interest rate once the zero APR period ends.
The Fed’s move will also lower interest rates on personal loans, so now might be the time for a debt consolidation loan, which would replace your existing card balance with a lower, fixed rate.
Looking to consolidate debt or make home improvements? Consider these personal loan offers.
Offers in this section are from affiliate partners and selected based on a combination of engagement, product relevance, compensation, and consistent availability.
Annual Percentage Rate (APR)
2. Refinance your student loans
Nearly 6 million Americans are at least three months behind on their federal student loan payments, according to a report from TransUnion, with approximately 2 million defaulting in September alone.
A drop in the federal funds rate means interest rates on student loans will also decline. If you have newer loans and were hit with high rates, the next year or two may be a good time to refinance.
Secure a lower monthly payment or better rate with these student loan options.
Offers in this section are from affiliate partners and selected based on a combination of engagement, product relevance, compensation, and consistent availability.
Undergraduate and graduate students, parents, health professionals
$5,000 minimum (or up to state); maximum up to cost of attendance
5, 7, 10, 15, years; up to 20 years for refinancing loans
3. Start house hunting again
If the Fed makes more cuts this year, it could go a long way toward thawing the frozen housing market.
Mortgage rates are more closely linked to 10-year Treasury bond yields, but they’re not immune.
Read more: The best mortgages for first-time homebuyers
“These rates may not necessarily move exactly in tandem with a reduction in the federal funds rate,” said Hubble. “But it’s still fair to assume that a lower fund rate will also mean a lower mortgage rate.”
As of Sept. 11, the average rate for a 30-year, fixed-rate mortgage was 6.35%, according to the Federal Reserve of St. Louis. While nowhere near the borrowers enjoyed during the pandemic, it’s a notable decline from January, when the average mortgage rate topped 7%.
Online mortgage lenders can often help homebuyers with lower interest rates and faster closing times
Offers in this section are from affiliate partners and selected based on a combination of engagement, product relevance, compensation, and consistent availability.
5% for conventional loans, 3.5% for FHA loans, 0% for VA loans, 10.01% for jumbo loan
4. Save smarter
The Federal funds rate is directly linked to the yield savers get on CDs, high-yield savings accounts, and other products. It costs banks more to borrow when the Fed raises its rate, so they make deposits more appealing to consumers.
When the benchmark declines, there’s less need for reserves. As a result, returns decrease almost immediately.
Read more: The best high-yield savings accounts
Even if a certificate of deposit or high-yield savings account drops below 4%, though, that’s still an exponentially stronger return than what you’ll get with traditional savings accounts. They’re hovering around 0.39%, according to FDIC data.
A CD, in particular, would let you lock in today’s interest rate for months or even years, regardless of future rate declines.
Competitive APYs are available through CDs offered by these issuers.
Offers in this section are from affiliate partners and selected based on a combination of engagement, product relevance, compensation, and consistent availability.
Annual Percentage Yield (APY)
Interest rates FAQ
When will interest rates go down again?
The last two Federal Open Market Committee meetings of 2025 are scheduled for Oct. 28-29 and Dec 9-10. The CME Group’s FedWatch Tool. gives better than 70% odds of cuts after both sessions.
What is the federal funds rate?
The federal funds rate is the target interest rate set by the Federal Reserve. It dictates the interest that commercial banks charge each other to lend extra reserves overnight. That, in turn, impacts the rates these institutions charge for credit cards, loans and other financial products.
How much will the Fed lower rates in 2025?
According to Reuters’ poll, 60% of economists expect the benchmark rate to decrease another 25 basis points by the end of 2025, while 37% predict a larger 50-basis-point decline before the year’s end.
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Meet our experts
At CNBC Select, we work with experts who possess specialized knowledge and authority based on years of training and real-world experience. For this story, we interviewed Amy Hubble, a principal investment advisor with Seattle-based Radix Financial. A certified financial planner, Hubble received a Ph.D. in consumer economics from the University of Georgia.
Why trust CNBC Select?
At CNBC Select, our mission is to deliver high-quality service journalism and comprehensive consumer advice to our readers, enabling them to make informed financial decisions. Every article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of financial products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content independently of our commercial team and any outside third parties, and we pride ourselves on maintaining high journalistic standards and ethics.
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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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