Working Capital

In its September meeting, the Federal Reserve is set to lower interest rates for the first time since the pandemic, claiming victory over its long-standing battle to bring record inflation down. The Central Bank began raising its benchmark interest rates in early 2022 and has since then seen inflation fall from more than 9% to about 2%.During that time, Americans continued spending and employers added jobs. As inflation comes into range, many employers are creating fewer new positions.Now, the Fed wants to make it easier to borrow money by lowering rates in order to avoid a recession. Economists say lowered rates come with benefits and drawbacks for consumers.”People who are buying a home will face lower mortgage rates. People who have car loans will face lower mortgage rates,” Louise Sheiner, an economist at The Brookings Institution, said. “On the flip side of that, people who have been getting really high rates of return on their savings will start getting lower rates of return on their savings.”The Fed will pay closer attention to the job market in the coming months to determine how quickly to drop rates. With interest rates now generally above 5%, the Fed is expected to cut rates by a quarter to half point.Still, it may take some time for consumers to feel the impact of the interest rate cuts. Many feel largely negative about the economy amid high prices and rate it among their top issues in the 2024 election. It is a main argument for former President Donald Trump against Vice President Kamala Harris.If elected, Trump says he will increase tariffs, which Sheiner says will raise costs for consumers. Meanwhile, Harris has proposed a variety of tax credits and anti-price gouging policies to offset higher prices.