'Real benefits' for Virginians expected after rate cut Virginia: Fed rate cut expected to bring 'real benefits' to borrowers (copy)

The background: The Federal Reserve had not cut its benchmark interest rate in four years as it sought to battle inflation.

What's new? On Wednesday, the Fed cut its overnight lending rate by half a percentage point.

What's next? The Fed signaled that it will cut the rate by another half-point this year and expects four more cuts in 2025 and two in 2026.

INSIDE: Federal Reserve cuts benchmark interest rate by half-point. Page A10

RICHMOND - Bruce Whitehurst says Virginians who need to borrow money for homes, automobiles and other big purchases will benefit from the Federal Reserve Board's decision to cut its overnight lending rate by half a percentage point.

"Anyone who's looking for borrow money should take this as a good move today," said Whitehurst, president and chief executive officer of the Virginia Bankers Association.

He said that's true for businesses, too, as they look to make investments and financing for big projects.

"There are going to be a lot of real-time benefits for borrowers, both consumers and businesses," he said.

Many people already may be seeing some of those benefits, as home mortgage rates have fallen by a percentage point or more in recent months in anticipation of the Fed lowering rates for the first time in more than two years as it tries to lower the rate of inflation without tipping the economy into recession.

"People have the misconception that rates weren't going down until the Fed did something - that isn't necessarily true," said Andrew Price, president of the Richmond Mortgage Bankers Association.

Price sees mortgage rates, now hovering in the 6% range, dropping closer to 5%, which he said not only could help prospective homebuyers, but also sellers who haven't been willing to put their homes on the market and buy a new one with a higher interest rate.

"Hopefully, this will get people off the sidelines," he said Wednesday.

People with variable mortgage rates and home equity lines of credit - and some business loans - will see an immediate benefit because their interest rates are tied directly to the Fed's funding rate.

It also could lower the interest rates on credit cards, but economist Kent Engelke isn't convinced consumers will see much relief.

"Will (a reduction of) 50 basis points make a difference for consumer loans and credit? Not really," said Engelke, chief economic strategist and managing director at Capitol Securities Management Inc. in Richmond.

"In my view, it's more symbolic than anything else," Engelke said.

But reducing the cost of one part of the family budget could help those businesses that depend on discretionary spending for travel, said Eric Terry, president of the Virginia Restaurant, Lodging and Travel Association.

"People who have high credit card balances may get a little bit of relief," Terry said.

If part of a household's costs go down, he added, "travel probably improves a little bit."

One Virginian who wasn't impressed was Gov. Glenn Youngkin, who focused on presidential politics in his remarks to Fox Business on Wednesday afternoon.

Youngkin, who is campaigning for former President Donald Trump and Republican congressional candidates, faulted President Joe Biden and Vice President Kamala Harris, the Democratic nominee, for what he called "unprecedented inflation" and then dipping numbers for new jobs as the Fed tried to cool the economy to bring prices down.

"After three years of unprecedented inflation and rising rates, this 50 basis-point cut reflects real concerns about job growth, which has been my focus throughout our entire administration," he said in a statement to the Richmond Times-Dispatch.

Youngkin also told Fox Business that "Virginia is competitive" in the presidential race, largely because of public concerns about the economy.

"The bottom line is the economy is the top issue, by far," he said.

Steve Cummings, Youngkin's secretary of finance, was more upbeat about the state economy in his presentation to General Assembly budget committees this week.

"Virginia continues to perform really well," Cummings told the Senate Finance & Appropriations Committee on Tuesday.

The Fed acted after the Consumer Price Index showed the rate of inflation falling to 2.5% last month after peaking above 9 percent more than two years ago. The number of new jobs has fallen, too, although the Gross Domestic Product grew by 3% in the last financial quarter.

Engelke, at Capitol Securities, said financial markets didn't respond much to the rate cuts because they already had taken it into account, but the cut was larger than he had expected. "I was somewhat surprised," he said.

Whitehurst, at the bankers association, said the Fed action sent a clear message about the shift of its priorities from inflation to jobs. "The Fed's focus is now clearly on employment," he said.