(WXYZ) — The Federal Reserve is expected to announce its second interest rate cut of the year today.
Watch Alicia's report in the video player below
Federal Reserve chairman Jerome Powell signaled in late August that rate cuts were likely this year. And then last month, the Fed lowered its key interest rate by a quarter-point (-0.25%) to help stimulate growth amid a weakening job market.
I talked with financial expert Rick Boom, who expects a quarter-percent cut announced today. I asked him how this could impact Americans, and specificially, how quickly it will that translate into lower mortgage and auto loan rates for consumers.
“Unfortunately, when they raise rates, it happens almost immediately," Bloom said. "When it lowers rates, it takes time to reach the consumers. So, unfortunately, it's not going to happen right away. And a lot of consumers may find their rates don't go down. Now, if you have a charge card that's an adjustable rate charge card, you're going to see a pretty quick change in that. But another charge card is probably not. And I think you won't see it on auto loans right away. I think it'll be a little while for it to filter through the system."
Bloom also said Certificate of Deposit rates would go down a little, meaning a lower rate of return for people saving money in the bank.
The No. 1 concern, he said, is that if rates go down too much, we'll see higher inflation.
"Even right now, inflation is still higher than the Feds would like it to be. It's stubbornly around 3%, which is higher than 2% target. And so there is this fear that if rates go down too much, we're going to see inflation," Bloom explained.
He does anticipate another rate cut announced in December as well.
But he said there's always a chance these two cuts won't happen.
"One of the things that has happened — because of the shutdown — is they don't have the same economic data like the jobs report [from the U.S. Bureau of Labor Statistics]. And they may decide to say, you know what, since we don't have the data that we need, we're just gonna push this off for another couple of months. And if they did that, I would expect short term for the market to have a negative reaction, but only short term."
Federal Reserve Chair Jerome Powell is scheduled to hold a news conference today at 2:30 p.m. ET.
Rick Bloom is the President of Bloom Advisors in Farmington Hills, Michigan.
