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Federal reserve lowers interest rates. Now what?
The Federal Reserve has issued its first rate cut of 2025. The challenge now is keeping both prices and unemployment down.
PETALUMA, Calif. - After nine months of waiting and balancing consumer prices against the health of the labor market, the Federal Reserve chose to begin the relatively long process of rate cutting to keep both prices down and unemployment down.
Rate cuts, especially when they begin, take time to put up steam and pick up the economy for the better.
At Petaluma's Hansel Ford, the sales manager is happy with any rate cut because more people can qualify for car loans.
Local business impact
"With the interest rates going down, you're gonna see more customers coming in day in and day out because it's gonna be easier to get those customers financed at the end of the day," said Hansel Ford Sales Manager Devyn Nunez.
Berkeley Haas School of Business economist Jim Wilcox says the sales manager, and all of us, can expect more and soon.
"I think it's quite likely that this will only be the first step among many cuts to come; some between now and New Year's Day and some next year," said Professor Wilcox.
WATCH: How the Fed's interest rate cut impacts housing market
The owner of the Wild Goat Bistro in the Great Petaluma Mill is happy too.
"It's fantastic news for me with an adjustable rate. We're gonna be saving a lot of interest for the next few years,’ said Jacob Gamba, Wild Goat Bistro’s owner.
Others are taking a wait and see attitude.
"Well, I think it remains to be seen really. You know, anytime you change interest rates, the effect is not immediate. So, we kind of need to give it some time," said tourism professional Rebecca Kreutz.
Residents hope the rate change will give relief when it comes to consumer prices.
"In general, with grocery and interest rates being high, hopefully the rate will give us a little bit of relief. Tariffs are coming on," said former Petaluma resident Kathy Barton.
WASHINGTON, DC - June 2: The Eccles Building, location of the Board of Governors of the Federal Reserve System and of the Federal Open Market Committee, June 2, 2016 in Washington, DC. (Photo by Brooks Kraft/ Getty Images)
Tariffs are an wild card, Wilcox says
Dig deeper:
Professor Wilcox says tariffs are an economic wild card.
"It's not clear at all how large the tariffs are going to be, on which countries, on which products," said Wilcox.
Tariffs could fuel inflation, which the Fed must guard against.
But, the Fed must equally guard against increasing unemployment.
Such a small cut might delay improving the economy.
"The first of interest rate cuts can sometimes cause people to hesitate a little bit in the other direction and wait for interest rates to fall even further," said the professor.
With rate cuts, folks with savings accounts, interest-bearing checking accounts and CDs may see what they earn on their money go down unless their rates are locked in.
The Source: Interviews with North Bay businesses, Berkeley Haas School of Business economist Jim Wilcox, and the Federal Reserve