TAMPA, Fla. — Consumers, home buyers and lawmakers have been waiting close to a year for what’s expected to be the first in a series of rate cuts for the Federal Reserve. 

Inflation peaked in mid-2022 at 9.1% and since then it’s been an ongoing journey to make borrowing more affordable.

While rate cuts are projected to come during a two-day meeting of the Federal Reserve that begins Sept. 17, Dr. Shivendu Shivendu, a professor with the USF Muma College of Business, predicts it will be either .25% or a more aggressive .5%.

What You Need To Know

  • Federal Reserve to cut rates for the first time in four years

  • Announcement expected during two-day meeting that begins Tuesday

  • Expected to be first in a series of rate cuts

  • Relief for home buyers and borrows will be gradual 

Following this rate cut, more are expected to follow.

“Federal policy is that interest rates should be adjusted in such a way that inflation is around 2% and unemployment is under 4%,” he said. ”They will try to get into that nice balance between these two things.”

Chair Jerome Powell emphasized in a speech last month that the Federal Reserve is prepared to cut rates to support the job market and achieve a notoriously difficult “soft landing.” That is when the central bank manages to curb inflation without tipping the economy into a steep recession and causing unemployment to surge.

Many interest rates have already fallen in anticipation of this week’s rate cuts. The average 30-year mortgage rate dropped to 6.2% last week the lowest level in about 18 months and down from a peak of nearly 7.8%, according to Freddie Mac. Other rates, like the yield on the five-year Treasury note, which influences auto loan rates, have also tumbled.

Shivendu believes that while major changes to mortgage rates and auto loans won’t be instant, in about a month people could start seeing some more movement.

Lower mortgages for home buyers could also mean more movement in the housing market. Shivendu believes people will see similar trends in home prices to what they saw from 2014 to 2020 when prices were increasing 2-3% a year following the recession.

“I believe they will come back to that level,” he said.” They will not be increasing at 15-20% per year, but they will also not plummet.”

This move is expected to be the first in a series of rate cuts.


Information from the Associated Press was used in this report.