What does the Fed rate cut mean for your money?

RALEIGH, N.C. (WNCN) — Borrowing could soon get cheaper, but experts say your savings account might take a hit, after the Federal Reserve cut interest rates by a quarter point Wednesday for the first time in nine months.

When determining whether to cut rates, the Fed has to balance inflation and the labor market. Dr. Michael Walden, William Neal Reynolds Distinguished Professor Emeritus at NC State University, said while inflation isn't where it should be yet, rising unemployment rates are springing the Fed into action.

"Right now, they're going to put the inflation fight aside and focus on the job market, which means focus on economic growth," he said.

Walden said lower rates will make borrowing money cheaper. That means businesses will have more money to invest, leading to more economic growth.

"I think the big takeaway is it looks like we're going to have somewhat cheaper credit that will help stimulate the economy a little more. It's going to motivate businesses who may be waiting on the sidelines to expand," he said. "Over time, that means more jobs, more opportunities. So, it's broader than just for consumers. It really is impactful on the entire economy and should cause the economy to grow a little faster."

But what does the Fed rate cut mean for your money?

"It will be a very indirect impact, but it will impact anything that is short term. Variable rate mortgages, credit cards, auto loans will see a pretty quick impact there," said Gerald Townsend, CEO of Townsend Asset Management.

But, Townsend warned, it's a double-edged sword, as the growth of your savings account could take a hit with lower rates.

"Your savings account, your money market funds, they're tied directly into that. And so, there'll be an immediate decline in that by at least that quarter point decline in the yields," he said.

And don't expect lower prices at the grocery store either. Inflation may even tick up as demand for cheaper money increases.

"We still have prices rising. That's always going to be the case. You're not going to get prices at all," said Walden. "We may be trading a slightly higher inflation rate down the road, but for more economic growth, that's exactly the kind of decision the Fed has to make."

During Wednesday's announcement, Federal Reserve Chair Jerome Powell hinted at two more cuts later this year. So, while it may be tempting to refinance your mortgage now, both experts said it's best to wait for even lower rates.

"If were up to me, my advice would be wait — wait till the end of the year, wait till another couple set of reserve meetings," Walden said. "If they cut more, then you'll be in an even better situation to wait because you'll get a much lower mortgage rate."

"That's something to keep your eye on and that'll be out there for a while. You're not going to miss the train on that one," Townsend said.