Fed lowered interest rates Wednesday. Will California consumers notice?

The Federal Reserve cut its key interest rates by a quarter-point Wednesday, but whether it will help the slow-moving California economy and give consumers a meaningful boost is questionable.

Consumers would undoubtedly see at least some benefit.

“Another Fed rate cut to close an unnervingly uncertain year is good news for borrowers. The accumulated savings from the Fed’s moves are starting to add up to real money,” said Matt Schulz, chief consumer finance analyst at LendingTree, which tracks interest rates.

The Fed has cut rates twice already this year, and lowered its target rate one quarter percentage point to 3.5% to 3.75%. That means that this year, rates have dropped three quarters of a point.

Banks use the rate to lend funds to each other overnight. The rate is a benchmark for many other rates.

Schulz expected that credit card rates, currently at their lowest level in two and a half years, could keep falling. The average APR on a new card offer is 23.96%.

“With a December cut and some card issuers still yet to implement October’s cut, the national average is likely to fall significantly to close 2025 and start 2026,” Schulz said.

“Lower rates stink for savers. Yet another cut means the days of 4% or higher returns on high-yield savings accounts may be ending,“ Schulz said. “They’re still worth signing up for, especially compared to traditional savings accounts at megabanks.”

There could be other sobering rate news.

Mortgage rates are far from the Covid-era lows in the 2% to 4% range. Freddie Mac, which tracks the rates, reported that the average on a 30-year fixed rate mortgage last week was 6.19%, down a half-point from a year ago.

Sung Won Sohn, president of SS Economics in Los Angeles, said mortgage rates may “settle around 6% — lower than the highs of 2023 and 2024 but still elevated compared to the past decade.”

Fed action does not directly influence mortgage rates. What tends to matter are several factors, including bond markets.

The UCLA Anderson Forecast earlier this month also warned that longer-term interest rates could climb.

“There are numerous factors that will place sustained upward pressure on long-term interest rates going forward,” it said. Among them: Ongoing federal deficits, a growing “demographic imbalance” as Baby Boomers retire and collect Social Security and use Medicare, and stubbornly elevated inflation.

The Fed has wanted to maintain inflation at a 2% annual level, a goal that remains elusive. The latest data found prices up 3% in the 12 months ending in September, the latest data available.

While price increases are expected to slow somewhat, UCLA warned that it still expects long-term rates to rise as high as 4.4% by the end of 2027. And, it said, it could go higher if inflation doesn’t cool.

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