The Federal Reserve announced that it’s lowering interest rates following its September 17-18 meeting, dropping the federal funds rate by 50 basis points, to a target range of 4.75 to 5.0 percent.

It’s the first time that the Fed has adjusted rates since July 2023, when it last boosted rates by a quarter percentage point. The central bank raised rates a total of 11 times during this economic cycle in an effort to tamp down high inflation, but it appears to be under control. Inflation fell to 2.5 percent in August after reaching the highest levels in decades at over 9 percent in mid-2022.

Now with inflation moving lower, the Fed has decided it’s time to start cutting rates.

“Inflation pressures have eased enough for the Federal Reserve to begin trimming interest rates,” says Greg McBride, CFA, Bankrate chief financial analyst. “This isn’t about giving the economy more juice but rather lifting the foot off the brake so that interest rates aren’t such a headwind to the economy.”

“This kicks off what will be a series of interest rate cuts through the balance of 2024 and through much or all of 2025,” says McBride.

At about 3.69 percent, the 10-year Treasury note has fallen from the start of the year and is much lower than its 52-week high of 4.99 percent, which was hit in October 2023.

Here are the winners and losers of the Fed’s latest rate decision.

1. Borrowers

If you’re an existing borrower and don’t need to tap the market for money – say, you previously locked in a 30-year fixed-rate mortgage in 2021 or 2022 – you’re in good shape. But even with falling rates, potential borrowers may not be able to access new credit, whether that’s credit cards (more later), student loans, personal loans, auto loans or whatever else you might need to borrow for.

The average interest rate on personal loans is 12.35 percent, as of Sept. 11, according to a Bankrate analysis, and the rate decrease will put further downward pressure on those rates. However, borrowers with better credit may still be able to access a lower rate. In 2021, the average rate was just 9.38 percent, when the fed funds rate was near zero.

Besides these new borrowers, anyone with floating-rate debt is breathing a sigh of relief at the Fed’s decision. Still, you may have an older loan that’s resetting at this year’s higher rates. For example, if you took out an adjustable-rate mortgage years ago, that loan may be resetting at higher rates and it may be pushing up your monthly payment, just not as high as it would be if the Fed had not lowered rates.

2. Credit cards

Many variable-rate credit cards change the rate they charge customers based on the prime rate, which is closely related to the federal funds rate. As the Fed sharply raised rates, rates on cards hit multi-decade highs. Now with the Fed lowering rates, interest on variable-rate cards should drop in line with this move and any upcoming ones.

“Credit card rates will stair-step lower as the Federal Reserve cuts interest rates repeatedly in the coming months,” says McBride. “But credit card rates are already near record highs and rates will come down slowly, so it is important for cardholders with balances to remain aggressive about debt repayment.”

“Utilizing zero percent or other low-rate balance transfer offers can turbocharge the debt repayment,” he says. “Credit card rates won’t fall fast enough to bail you out of a bad situation.” (Here are some of the top balance-transfer cards to consider.)

Rates on credit cards are largely a non-issue if you’re not running an ongoing balance.

3. Mortgages

While the federal funds rate doesn’t really directly impact mortgage rates, which depend largely on the 10-year Treasury yield, they’re often moving the same way for similar reasons. With the 10-year Treasury yield falling through much of 2024, mortgage rates have gone along for the ride.

“Mortgage rates have retreated mightily from the peak of 8 percent last October to a 19-month low of 6.31 percent now,” says McBride. “This has opened the door to refinancing for many of the homebuyers of the past two years.”

Additional declines in interest rates should allow mortgage rates to come down further, but it won’t be a simple one-to-one correlation.

“While further declines in mortgage rates are expected, it might be a choppier process and there are no guarantees as to when and how much further mortgage rates will decline,” says McBride.

Mortgage rates remain well above where they were three or four years ago, and this – following the rapid rise in housing prices over the recent past – has created a double whammy for potential homebuyers. Home prices are more expensive and the financing is pricier, resulting in a slowdown in the housing market.

The cost of a home equity line of credit (HELOC) should decline since HELOCs stay aligned with changes in the federal funds rate. HELOCs are typically linked to the prime rate, the interest rate that banks charge their best customers. Those with outstanding balances on their HELOC will likely see rates stay close to where they are currently, but it can still be a good time to shop around for the best rate.

4. Stock and bond investors

Low rates are typically beneficial for stocks, making them look like a more attractive investment in comparison to rates on bonds and fixed-income investments such as CDs. Low rates are also generally a positive for holders of bonds, whose prices rise with lower rates.

“Stock investors will cheer lower rates as long as the economy continues to grow, but if we start seeing the Fed cutting rates due to concerns about recession, stocks will sell off,” says McBride. “Stock investors should continue to focus on the long-term and not let short-term volatility distract them or prompt them into knee-jerk reactions.”

So, with the economy slowing and stock valuations at elevated levels, stock investors may still be in for a choppy ride.

Over the past couple of years, higher rates have hit bonds hard — and the longer the bond’s maturity, the more it was stung by rising rates. However, with lower rates and the potential for even lower rates in the future, those putting new money into bonds should like what they’re seeing. As rates fall, fixed-income investors will benefit as bond prices move higher, though they may have to contend with reinvesting at lower rates. Short-term rates remain attractive if you’re looking for a safe place to stash money while waiting for things to cool off.

“Like CDs, income-oriented investors can lock in attractive bond yields now but waiting will only result in still-lower yields,” says McBride.

5. Savings accounts and CDs

The Fed’s rate cut means that banks will lower rates on their savings, CDs and money market accounts, though many others have already been actively paring them back in anticipation of the Fed lowering rates.

“Yields on the top savings accounts, money market accounts, and CDs have backed down from the peaks, and this will accelerate further as the Federal Reserve cuts interest rates repeatedly,” says McBride.

Savers looking to maximize their earnings from interest should consider turning to online banks or the top credit unions, where rates are typically much better than those offered by traditional banks.

When it comes to CDs, account holders who recently locked in rates will retain those yields for the term of the CD, unless they’re willing to pay a penalty to break it.

With rates likely to only fall from here, it may be a good time to lock in longer maturities on CDs, especially those in the 2-year to 5-year timeframe while they remain relatively high.

“Locking in a CD now is locking in a yield that should outpace inflation pretty handily over the term of the CD,” says McBride.

6. The U.S. federal government

With the national debt topping $35 trillion, a decline in rates will at least temporarily relieve some pressure on the borrowing costs of the federal government as it rolls over debt and borrows new money. That said, the government’s total borrowing costs continue to rise as older debts at lower rates must be rolled over at today’s higher interest rates.

Of course, the government has benefited for decades from a secular decline in interest rates. While rates might rise cyclically during an economic boom, they’ve been moving steadily lower long term.

As long as inflation remained higher than interest rates, the government was slowly taking advantage of inflation, paying down prior debts with today’s less valuable dollars. That’s an attractive prospect for the government, of course, but not for those who buy its debt. Now, with interest rates higher than inflation, the tables have turned, and the government is repaying debt with today’s more costly dollars.

With 2024 being a hotly contested election year, the surging debt and its high carrying cost may impact the results.

Bottom line

With inflation cooling significantly, the Fed has decided to lower interest rates. Smart consumers can take advantage, for example, by being more discriminating when it comes to shopping for rates on savings accounts or CDs. It can still be a good time to lock in longer-term rates on CDs or even get a good balance-transfer credit card.