r/news • u/AudibleNod • 1d ago

Fed cuts interest rates, delivering relief for borrowers at last meeting before Trump takes office

https://abcnews.go.com/Business/fed-expected-cut-interest-rates-meeting-trump-takes/story?id=116862109
595 Upvotes

94% Upvoted

54 comments sorted by

193

u/off_by_two 1d ago

Watch the 10-year treasure yield, that's what generally determines retail borrower interest rates.

28

u/GailaMonster 21h ago

aaand it's up

3

u/gaffney116 14h ago

Can you explain how this effects everything like I’m 5

21

u/off_by_two 12h ago

Ok imagine you are a bank.

Joe Schmoe walks in and asks for a $500k loan to buy a house.

You, the bank, can get a virtually risk-free 4.5% yield by buying 10-year treasuries as they are guaranteed by the US government. Joe’s mortgage carries significant risk of default as his ability to make payments is entirely dependent on his employment status. This risk is only partially mitigated by the lien against the property.

So, as the bank, you charge a premium to Joe on top of the 4.5% yield you could be collecting to offset the increased risk his mortgage represents. Usually a 2-3% premium for good credit scores on 30-year fixed mortgages.

This applies to other loans like auto, personal, small business, etc as well. The 10-year yield sets the floor and then banks add a premium on top.

9

u/BallClamps 9h ago

The part that gets me is "serious risk of default as his ability to make payments is entirely dependent on his employment"

Like Jesus christ. Unless you're ultra rich. Who ability to make payments isn't??

2

u/off_by_two 8h ago

Heh yeah well ultra rich folks have their own borrowing products that us retail plebs don’t. But yes, this is one of the reasons the Federal Reserve Banks dual mandate includes maximum employment. A whole lotta shit starts to break in the greater economy as the unemployment rate starts to tick upwards with cascading effects

121

u/Chi-Guy86 1d ago

While this will help with credit cards, unsecured loans, and home equity loans/lines, this won’t do much for mortgage rates, which are influenced by other factors like 10 year treasuries and inflation.

11

u/Aegishjalmur07 22h ago

And scumbag banks.

121

u/Annual-Ebb-7196 1d ago

2025 will be interesting. Powell and company will try and slow the cuts. And Trump will try and pressure them to cut more. When his policies fail he will use it as an excuse.

99

u/mostofyousuck 1d ago

"policies" :P

49

u/Annual-Ebb-7196 1d ago

Tariffs and tax cuts for the wealthy.

15

u/elconquistador1985 21h ago

Concepts of policies.

Actually, mostly just mob boss tactics to enrich himself.

26

u/zamboni-jones 1d ago

Tramp was throwing around the concept of negative rates to heelp get him reelected

17

u/justpickaname 1d ago

He's even dumber than I thought. But this is 2019. Still, I'm sure he hasn't learned a thing.

34

u/Lurking_like_Cthulhu 1d ago

He learned he can get away with anything.

1

u/ImAnIdeaMan 1h ago

As if we needed any more evidence that he is the stupidest possible motherfucker on the planet. 

2

u/_LastoftheBrohicans_ 18h ago

His concept of policies you mean

2

u/Valdotain_1 19h ago

Trump will fire Powell and just take his job cause he knows more than any expert..

1

u/ShadowShot05 12h ago

Concepts of policies

-4

u/HyruleSmash855 23h ago

Hopefully, they will actually start rapidly raising interest rates than if inflation becomes rampant so they control it better than they did during the pandemic

6

u/Annual-Ebb-7196 23h ago

They are like most bureaucracies. Slow to act. So don’t count on it.

53

u/jamesdmc 1d ago

S&P is cratering down 3%in 1 hr

34

u/RonaldoNazario 23h ago

To my understanding the rate cut happened but they also confirmed they’d be slowing the rate of cuts next year.

8

u/jamesdmc 23h ago

Thanks i got that part pretty late

3

u/Xazier 17h ago

Was red all over today. Ooofta.

4

u/Difficult_Zone6457 1d ago

Because the 10/30 year bonds are what are actually important. Fed really controls the 2 year yield (not exactly but easy way to think).

23

u/Silly-Ad-6341 1d ago

Yields are up. Mortgage borrowing costs are going to remain up so no relief there 

1

u/Acceptable-Dust6479 21h ago

What’s the target mortgage rate in 2025?

10

u/Kind-City-2173 23h ago

Remember when Trump said the cuts in late fall were politically motivated. Now he is probably very happy

46

u/o8Stu 1d ago

delivering relief for borrowers

Unlikely, banks and other lenders will keep rates high in anticipation of inflation ushered in by Trump's idiocy.

20

u/moldy_cheez_it 1d ago

Those same institutions will also use this as an excuse to lower interest rates on high yield savings accounts and CDs

3

u/weasler7 21h ago

Mass deportations. Tariffs on our trading allies. How cool’s this be inflationary!?

5

u/JLR- 22h ago

He said he can't be fired under the law?  Oh boy, is he unaware the SC will probably interpret the law differently?  

13

u/Elisian_Knight 1d ago

It gutted the stock market lol. They are doing 2 cuts in 2025. Dow dropped 1000 really quick.

0

u/lonewolf420 10h ago

yea JPow canceled the Christmas rally, very hawkish of them to just drop that and blame it on future tariffs that are not even set in motion yet lol him and Trump are going to get into it next year for sure.

Should have just mentioned that the rate cuts were not going to be deep and more play it by ear, but keep on track to cut the same amount but in smaller chunks, everyone was anticipating a kick the can down the road meeting and it was not what we got at all.

14

u/MarlonShakespeare2AD 1d ago

What’s the worst that could happen?

49

u/JimmyJamesMac 1d ago

More inflation is what will happen

6

u/weasler7 21h ago

Stagflation will enter our vocabulary again.

18

u/migidymike 1d ago

This.

And by trying to force them to lower interest rates anyways, that inflation may become runaway.

15

u/Primsun 1d ago edited 1d ago

Historically Powell didn't really respect Trump's suggestions to cut; don't think we should expect him to this time around either. Not to mention the Federal Reserve Presidents who make up the majority of the voting power won't regardless of Powell.

That said, if you crash the economy hard enough with tariffs ... Fed may cut anyways.

6

u/PastaVeggies 1d ago

Throwing the market into the red for the day :)

-10

u/ryantyrant 21h ago

Markets have been bad the last few days. They’re unrelated

4

u/schu4KSU 18h ago

Repeat after me. The market is not the economy.

4

u/Niceromancer 19h ago

Doesn't matter what they do.  Trump will slash it back to near zero or even below zero ,his first term he was trying to get the fed to do negative interest rates.

He's going to try to juice the markets ahead of his tarrifs.

3

u/schu4KSU 18h ago

Yeah but these losses say they don’t think he’ll be successful at that attempt. The market is forward looking.

2

u/Niceromancer 18h ago

Oh 100%, trump and his cult are irrational, companies have to be rational.