The Federal Reserve, after months of hectoring by President Trump, trimmed the federal funds rate by 25 basis points on Sept. 17, reducing the cost of borrowing that includes credit cards, loans, and auto financing.
The central bank’s decision to cut the federal funds rate by one-quarter to a range of 4% to 4.25% was not unexpected. All but one of the members of the Fed voted for the rate cut. The lone dissenter, Stephen I. Miran, preferred to lower the target range for the federal funds rate by 1/2 percentage point.
In its statement, the Fed said, “Recent indicators suggest that growth of economic activity moderated in the first half of the year. Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated.
“The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen.”
The Fed has kept borrowing costs elevated for more than two years to help slow inflation, which climbed to a more-than-40-year high of 9.1% in June 2022.
Inflation rose to 2.9% in August from a year earlier, above the Fed’s 2% target. But the central bank’s statement suggests it is focusing on a weakening labor market as growth has slowed in recent months. New Jersey’s unemployment rate for July rose to 5% from 4.9%. The state’s jobless rate has been consistently about a half a percentage point higher than the national average.
Tom Bracken, New Jersey Chamber of Commerce’s president and CEO, said the rate cut effect on New Jersey will be “impactful positively. It will be positively received.” He said the possibility of two more rate cuts before the end of the year will put companies “in a good frame of mind.”
Bracken added that businesses borrowing in the short term stand will benefit most. “Any rate cut is good news for borrowers rather than investors,” he said.
Credit card interest rates are variable and directly tied to the Fed’s benchmark. That means borrowers carrying a balance will see changes within a few billing cycles.
New car loan rates usually edge lower when borrowing costs fall though not automatically. On a $35,000 loan over five years, payments would drop by about $4 a month with a quarter-point cut, based on Wednesday’s average percentage rate of 7.19%.
“The NJ auto dealers are pleased with the action taken by the Federal Reserve and believe it will have a positive impact on the auto market in the state,” said Laura Perrotta, president of New Jersey Coalition of Automotive Retailers (NJCAR), which advocates on behalf of New Jersey’s new car and truck business owners. “The adjustment will boost consumer confidence and while it won’t directly impact auto loan interest rates it will make it more affordable to borrow money to purchase a vehicle and hopefully will provide customers with more appealing loan terms.”
Homeowners seeking to unlock equity via home equity loans — the portion of the home they own outright — do so through a revolving credit line. Rates are variable and tied to the prime rate, which moves with the Fed’s benchmark, so borrowers usually see lower costs soon after a rate cut.
Prospective homeowners were feeling better about interest rates before the Fed’s action. On Sept. 17, the current average interest rate for a 30-year fixed mortgage was 6.24%, according to Bankrate. Rates are lower than they were in early 2025, when the average 30-year fixed-rate mortgage climbed above 7%.
“The Fed’s recent rate cut comes at a time when mortgage rates have finally started to ease, falling back to their lowest level in nearly a year,” said Maggie Volk, senior vice president, director of mortgage and consumer lending, Provident Bank. “That shift is meaningful for first-time buyers, who continue to have affordability at the forefront of their minds. Data from our First-Time Home Buyer Survey supports this sentiment and found that high mortgage rates and the lack of homes within budget are the two biggest challenges they face. Even a small drop in rates can make the difference between waiting and moving forward, and we’re seeing more first-time home buyers revisiting the idea of buying a home after sitting on the sidelines. This cut helps sustain a more positive conversation in the housing market. For buyers, it’s a sign that conditions are improving, slowly, but in the right direction, and that sense of momentum matters.”
