Federal Reserve Board cuts the cost of borrowing

For the first time since the start of the pandemic, the Federal Reserve Board cut its benchmark interest rate by an unusually large half point.

Financial analysts call the move "aggressive."

It's also a dramatic shift after keeping rates high to tamp down inflation, a policy that made borrowing painfully expensive for consumers like Sabina Correa.

When her car recently broke down she looked at buying a new one, but high interest on top high prices changed her mind.

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"It's too high right now to buy a new car," she said. "It's almost as much as my house payment."

Bankrate's Chief Financial Analyst, Greg McBride, expects this to be the first in a series of cuts that will continue well into next year.

"Cumulatively, when we look back six, twelve months down the road," he said. "We'll see a noticeable difference in the cost of carrying debt, the cost of borrowing."

But he added, "We're just going from a high rate environment to not as high."

One area of the economy is already seeing benefits from the cut — mortgage rates. Anticipation of it coming helped push down mortgage rates.

"Mortgage rates have fallen a full percentage point just since May and that's opened up the door to refinancing to a lot of people that bought homes in the past couple of years and paid higher rates," he said.

McBride does not anticipate that this one cut will lead to a big drop in interest rates for credit cards.

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