Liam Dillbeck | News Editor
September 27, 2024
As of Wednesday, September 18, 2024, the Federal Reserve slashed their interest rate 50 basis points, or roughly 0.5%. Starting at a range of a 5.25% – 5.5% interest rate, the Federal Open Market Committee (FOMC) met to discuss the currently high level of inflation and weakening labor market. Looking for a solution, the committee concluded that lowering the interest rate to 4.75 – 5% could be exactly what they’re looking for.
Now that you have a summary, let me explain in high school terms. The interest rate is the rate at which the loan you take out of a bank will increase, relative to the initial amount, until you are able to fully pay back the loan. Yes, the banks are the ones that decide the interest rate of your loan, but they are often influenced by the health of our economy. The recent cut in the federal interest rate is simply the FOMC telling the banks that they are confident “that inflation is moving sustainably toward [a very healthy] 2 percent,” meaning our economy is moving in a positive direction. AP United States History teacher, Mark Popovich agrees that “it was about time for this to happen. Lowering that half percent means it’ll lower for banks probably a little bit more, which those banks will pass on to businesses. Your car loan will get cheaper, your house loan will get cheaper, things like that.” As a high school student, you probably are not taking out many bank loans. However, your parents definitely are. Banks will be willing to offer your parents a lower interest rate because of the confidence in the economy supplied by the FOMC.
What does this mean for a high school student?
Have you been dreaming about a car? Have you just got your license? Do you not want your parents to drive you to the group hangout? Personally, I love being able to freely drive myself across the city and beyond. Barriers don’t seem to exist anymore. Cars are freeing but are also crucial factors in supplying high schoolers with a ticket of maturity due to the responsibility that comes with driving.
The car market has been off-limits for quite some time, but fortunately, with the new opportunity of lower interest rates, taking out a reasonable auto loan is more than attainable right now. As senior Liam Carrol stated, “I’ve been stuck sharing the same car with my dad and brother for the last two years. I think my dad finally broke and might get the kids their own car.” Whether your family is going to act on this is purely up to you. Cars are not going to become super cheap or anything of that sort, and purchasing a new car will always be a significant development within your family dynamic. However, if you and your family have been on the fence recently, now might be the time.
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