Federal Reserve Rate Cut: What it means for jobs, loans and the economy

With the Federal Reserve cutting interest rates on Wednesday, what does that mean for you? News On 6's Dave Davis spoke with Clint Dishman from BOK Financial to answer that question.

The Federal Reserve cut interest rates from 4.25 down to 4%. What was your immediate reaction?

"Yeah, they cut rates by 25 basis points, and it's the first rate change in nine months. So it is a change from being a more restrictive monetary policy to more accommodated. And I think they're trying to move towards a more neutral rate to ensure that both of their mandates—full employment and stable prices—are in check."

SEE ALSO: Federal Reserve lowers interest rates by 0.25 percentage points in first cut since December

Do you think that this will make it cheaper to borrow money in the short term, long term? I mean, if we're talking about car loans and house prices with those mortgage rates in there, when does that take effect? When benchmark changes, how long is it?

"Yeah, the federal funds is tied to a lot of different lending rates. So your prime rate is affected by that. The prime rate yesterday was 8.25. They cut it by 25 basis points, so you're seeing a decrease today to 8%. That sets rates for credit cards, adjustable-rate loans, lines of credit—things of that nature are set to that. The credit cards, though, when you're dealing with a 20% interest rate and you cut it by 25 basis points, it's not a big deal. But it will impact those people in adjustable-rate mortgages. Mortgages are set more on a 10-year Treasury yield basis, so those will be a little longer to impact. And a lot of the pricing in the markets has already taken place."

The Federal Reserve has talked about unemployment, kind of going with all the revisions and all the arguing in Washington over the revisions, the job numbers. Bottom line, do you think cutting the interest rates is going to in some way help companies hire people, make it easier to hire? What's the impact on jobs?

"I think it does. That's the method that the Fed has—to lower or raise interest rates for their monetary policy. To get full employment, they want to have the economy growing. The economy is 70% driven by consumer spending, so if your consumers aren't spending, then you have a problem. That's kind of what's going on with the unemployment rate increasing."

"New jobs are harder to find, and the sentiment in the job market is that it's getting tougher. That can make the sentiment negative, where people are not willing to go on vacation or they're not willing to buy a new car until it gets better. So that's kind of the situation that the Fed is looking at and weighing. What should we do? Cutting the rates by 25 basis points will help stimulate the economy because it does make borrowing cheaper for companies."

Overall, at this time, everything considered, a rate cut a good thing or a bad thing right now?

"I think it's a good thing. The Fed has a dual mandate of, like I said, maximum employment and stable prices. The prices, when you look at inflation, are at 2.9%. The target is 2%. So we're still a ways off, but you have to look at how far we've come over the years getting inflation down. The 2.9% also includes the tariffs that were maybe more of a one-time impact on inflation. So the Fed has, in my mind, the green light to focus on growth, focus on employment, and that's what they're doing with the 25-basis-point rate cut."