The Fed is expected to cut interest rates this week, a decision likely to be the start of a gradual decline in how much consumers pay for cars, houses and everything they buy on credit.
Just don’t expect sudden changes.
Lenders and markets have anticipated a rate cut for weeks, so “this has been priced into the market,” said Jerry Nickelsburg, faculty director of the UCLA Anderson economic forecast.
As a result, “We shouldn’t expect this upcoming Fed rate cut or lower mortgage rates to totally reshape California’s housing market, or its overall economy,” said Jacob Channel, senior economist at LendingTree, which tracks interest rates.
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The Federal Reserve is expected to cut its target interest rate when it meets Tuesday and Wednesday. A cut would reverse a trend of higher rates that began in early 2022.
The cut, likely to be announced Wednesday afternoon, is seen as between one-fourth and one-half of 1 percentage point.
The Fed began increasing its target rate as the pace of inflation began to spike in early 2022. Its aim was to slow the price increases, which hit a 40 year annual high of 9.1% that summer.
Higher rates usually help slow price increases, since demand cools and sellers of goods and services are less inclined to raise prices. The strategy has largely worked, as the rate of inflation for the 12 months ending in August was 2.5%, according to the federal Bureau of Labor Statistics.
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The Fed’s current target rate is between 5.25% and 5.5%. That is the rate banks charge one another for overnight lending. The banks and other lenders then loan funds to consumers at higher rates in order to make a profit.
Is this the first of many interest rate cuts?
Many economists see even further rate cuts in the months ahead, thanks to the slowing pace of inflation and a desire to boost an economy that appears to be slowing down..
Declining oil prices and slower wage increases make the future inflation outlook “cautiously optimistic,” said Sung Won Sohn, president of SS Economics, a Los Angeles-based economic consulting firm.
As a result, he said, the Fed is “likely to consider further policy adjustments to maintain stability in the face of evolving economic conditions.”
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Will this be a good time to buy a home?
There’s no easy answer.
“Borrowers are likely going to meet rate cuts with open arms, but borrowing isn’t about to become so inexpensive that people feel obligated to totally change their financial strategies,” said Channel.
“Don’t expect getting a mortgage and buying a house to suddenly become dramatically easier in the immediate future,” he said.
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Rates for a 30-year mortgage have been dropping, from a high of 7.79% 11 months ago to 6.2% last week, according to Freddie Mac, which tracks rates.
More good news: the median price of a home statewide was down in July, the latest data available. That was the second straight month of decline after hitting a record high in May, said the California Association of Realtors.
The July median price was down 1.6% from June to $886,560. That figure, though, was still 6.5% higher than a year earlier, when the median was $832,530.
Sales of existing single family detached homes in California were up in July, and there was optimism about what’s ahead.
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“This improvement in lower borrowing costs could motivate homebuyers on the sideline to re-enter the market, especially since home prices began to soften at the tail end of the homebuying season,” said Jordan Levine, the association’s chief economist, in a statement.
The association said in a press release it expects home prices to “soften further in coming months but should continue to register moderate year-over-year growth for the rest of the year.”
Mortgage rates generally depend on longer-term trends. Freddie Mac said this week that rates have dropped because of “incoming economic data that is more sedate.”
Will my credit card interest rate drop?
“This one rate cut isn’t really going to make much of a difference for most people,” said Matt Schulz, credit analyst at LendingTree.
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Regardless of what the Fed does, he said, consumers can keep credit interest rates low fairly easily. They can pay their credit card bills on time and pay no interest, or shop for lower rates among the many creditors offering loans.
“These are historically high rates, and while they’ll almost certainly fall from record highs in coming months, no one should expect dramatically reduced credit card bills anytime soon,” said Schulz.
“Barring the Fed unexpectedly stomping on the gas pedal when it comes to lowering rates, credit card APRs (annual percentage rates) are still going to be high for the foreseeable future,” he said.
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Will monthly car payments decrease?.
Schulz saw auto loan rates falling, but again said it’s up to consumers to find the best rate.
“It is still crucial to shop around for the best available rates and get pre-approved for a loan before you ever head into the dealership because the rates you’d get from the dealer can be far higher than what you can get elsewhere,” he said.
Electric-vehicle makers boosted Hong Kong stocks on Friday, as major indices rose across the board in the wake of the US Federal Reserve’s interest rate cut.
The Hang Seng index rose 1.8 per cent, with Chinese EV companies Xpeng and Geely Auto adding 9 per cent and 4.8 per cent, respectively.
Japan’s Topix rose 1.5 per cent, while South Korea’s Kospi added 1 per cent.
Australia’s S&P/ASX 200 rose 0.4 per cent, led by clinical trial groups Euren Pharmaceuticals and Telix Pharmaceuticals, which gained as much as 6.7 per cent and 4.9 per cent, respectively.
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On Thursday, the S&P 500 gained 1.7 per cent, hitting a new record after the Fed’s half-point rate cut announcement on Wednesday.
Last week JPMorgan made headlines by announcing it planned to cap its junior bankers’ working week to 80 hours (“High pressure, long days, crushing workloads: why is investment banking like this?”, FT Alphaville, FT.com, September 13).
The media and most western professionals and other workers will see that figure as extraordinarily high — but the small print makes clear that the cap will not apply when junior bankers are working on “live” deals.
The 80-hour working week, it seems, is the routine baseline expectation.
Former investment banker Craig Coben, author of the FT Alphaville piece, outlined the history and factors that make the long-hours culture a seemingly intractable fact of life across the investment banking industry — and other related sectors such as Big Law.
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As investment banking is a bespoke service the work cannot fit into a standard nine-to-five schedule. The question is: does this bespoke service require regular “all-nighters”?
Is this really the most efficient approach? Research shows that working long hours does not improve productivity. Studies document diminishing returns after a certain threshold — typically around 50 hours per week.
Coben also pointed to the mega-salaries junior bankers earn. In the end, there is no such thing as a free lunch in life.
They know what they are getting themselves into. The reality may not be as glamorous as it seems. Assuming an entry salary of £90,000, as indicated in the article, an 80-hour working week for 47 weeks a year — admittedly a very basic calculation — junior bankers would earn a higher hourly rate by doing private tutoring!
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Yes, this is partly down to the nature of the business but it is also a self-perpetuating culture that is blocking efforts to at least mitigate its worst excesses.
Addressing this could, in fact, positively impact productivity as well.
Sonia Falconieri Professor in Corporate Finance, Bayes Business School (formerly Cass), London EC1, UK
“We asked for a thorough investigation,” says Olivia.
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“That’s definitely what they’ve done as it’s been a while now.
“I hope the FA do the right thing.
“It’s important we don’t skim over what happened.”
Regardless of the outcome, the 25-year-old says there’s no way things can stay the same in women’s football.
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“I’d like to think that after what’s happened to my sister, there’s no way there can’t be any change.
“Maddy ultimately lost her life and her spirit to football and it’s important that nobody else goes through that.”
Maddy’s family has launched a foundation in her name to support women and girls in football and hopes to be a voice for them too.
“You can’t bury your head in the sand,” says Olivia.
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“You need to stand up for these girls and stand up for Maddy ultimately as well.
“We just really wanted to find what was missing and give these girls a voice.”
They recently hit a £50,000 milestone, something Olivia says she “never even dreamed of”.
“It made me really proud,” she says.
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“I thought, we could really change the game here and change young girls’ lives.”
‘I’m going to be like Maddy’
Some of the money raised goes towards supporting girls like eight-year-old Neveah, who idolised Maddy.
Neveah’s mum, Beth, tells Newsbeat the love started when she was assigned the same number football shirt.
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“She’d see Maddy play and say, ‘Mum that’s me – I’m number eight, I’m going to be like Maddy’.”
Last year, Neveah was a mascot for Sheffield United and chose to walk out with Maddy, which Beth says helped to “grow her love of football”.
When Maddy died, Beth says Neveah “took it really hard” and, in December, the foundation offered to pay for her to have new boots – something the family had done for Maddy every Christmas.
Since then it has also sponsored her kit.
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“She was very touched by that,” Beth says.
“We always get in touch with the family because she likes to tell them how many goals she’s scored for Maddy.”
Although Neveah is sometimes the only girl on the pitch, she is generally supported and encouraged in the sport, says Beth.
But she knows that might not always be the case, and that is why the work of the foundation is so important.
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“[Girls] need to know that support is available for them,” she says.
“I just hope Neveah’s journey through football, however long it is, continues to be positive.”
Olivia says her sister was “loved and adored and an inspiration to so many”.
“My main focus with the foundation is to carry that on for as long as I can and to bring her to life for as long as I can as well.”
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There will be a vigil for Maddy later and she will also be remembered at a match between Sheffield United and Derby County – the club Maddy supported – on Saturday.
“She would’ve been there for sure,” Olivia says of her big sister. “With a beaming smile.”
A spokesperson for Sheffield United told Newsbeat they were pleased to mark the anniversary with the match.
“The thoughts of everyone associated with Sheffield United Football Club remain with the Cusack family, as well as Maddy’s friends, colleagues and team-mates,” they added.
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The FA said it would not be appropriate to comment while it was still investigating.
If you’ve been affected by the issues raised in this article, help and support is available via BBC Action Line.
Listen to Newsbeat live at 12:45 and 17:45 weekdays – or listen back here.
No publication has bettered the FT for the coverage of Boeing’s downward and tragic flight path resulting from putting financial engineering (sic) before real engineering. Rereading John Gapper’s piece about the revival of Rolls-Royce’s fortunes (Opinion, September 13) I was surprised to see no words of caution about the possible consequences of too much “squeezing” of a product that must work perfectly throughout its life, and no warning on the potential for a Boeing outcome.
For me, I am always reassured when I look out from a window seat to see the classic black and silver RR logo on the engine housing. Long may this continue.
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