The Federal Reserve announced it will lower its benchmark rate by a quarter point, or 25 basis points, days after President-elect Donald Trump won the 2024 election.

Economic uncertainty was a prevailing mood heading into Election Day after a prolonged period of high inflation left many Americans struggling to afford the cost of living.

But recent economic data indicates that inflation is falling back toward the Fed’s 2% target, which paved the way for the central bank to trim rates this fall. Thursday’s cut is the second, following a half point reduction on Sept. 18.

The federal funds rate sets overnight borrowing costs for banks but also influences consumer borrowing costs.

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Since the central bank last met, the personal consumption expenditures price index — the Fed’s preferred inflation gauge — showed a rise of just 2.1% year over year. 

Even though the central bank operates independently of the White House, Trump has been lobbying for the Fed to bring rates down.

For consumers struggling under the weight of high borrowing costs after a string of 11 rate increases between March 2022 and July 2023, this move comes as good news — although it may still be a while before lower rates noticeably impact household budgets.

“The Fed raised rates from the equivalent of the ground floor to the 53^rd floor of a skyscraper, now they are on the 47^th floor and another rate cut will take us to the 45^th floor — the view is not a whole lot different,” said Greg McBride, chief financial analyst at Bankrate.com.

From credit cards and mortgage rates to auto loans and savings accounts, here’s a look at how a Fed rate cut could begin to impact your finances in the months ahead.

Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark. Because of the central bank’s rate hike cycle, the average credit card rate rose from 16.34% in March 2022 to more than 20% today — near an all-time high.

Annual percentage rates have already started to come down with the Fed’s first rate cut, but not by much.

“Still, these are sky-high rates,” said Matt Schulz, LendingTree’s credit analyst. “While they’ll almost certainly continue to fall in coming months, no one should expect dramatically reduced credit card bills anytime soon.”

Rather than wait for small APR adjustments in the months ahead, the best move for those with credit card debt is to shop around for a better rate, ask your issuer for a lower rate on your current card or snag to a 0% balance transfer offer, he said.

“Another rate cut doesn’t change the fact that the best thing people can do to lower interest rates is to take matters into their own hands.”

On the campaign trail, Trump proposed capping credit card interest rates at 10%, but that type of measure would also have to get through Congress and survive challenges from the banking industry.

Even though auto loans are fixed, higher vehicle prices and high borrowing costs have become “increasingly difficult to manage,” according to Jessica Caldwell, Edmunds’ head of insights.

“Amid this economic strain, it’s clear that President Trump’s promises of financial relief resonated with voters across the country,” she said.

The average rate on a five-year new car loan is now around 7%, up from 4% when the Fed started raising rates, according to Edmunds. However, rate cuts from the Fed will take some of the edge off the rising cost of financing a car — likely bringing rates below 7% — helped in part by competition between lenders and more incentives in the market.

“As Americans seek a reprieve from the relentless pressures on their wallets, even a modest federal rate cut would be seen as a positive step in the right direction,” Caldwell said.

Trump has supported making the interest paid on car loans fully tax deductible, which would also have to go through Congress.

Trump has said he’ll bring down mortgage rates — even though 15- and 30-year mortgage rates are fixed, and tied to Treasury yields and the economy. Trump’s victory even spurred a rise in in the U.S. 10-year Treasury yield, sending mortgage rates higher.

Cuts in the Fed’s target interest rate could, however, provide some downward pressure.

“Continued rate cuts could begin to drive down mortgage rates which have remained stubbornly high,” said Michele Raneri, vice president of U.S. research and consulting at TransUnion. As of the week ending Nov. 1, the average rate for a 30-year, fixed-rate mortgage is 6.81%, according to the Mortgage Bankers Association.

Mortgage rates are unlikely to fall significantly, given the current climate, explained Jacob Channel, senior economist at LendingTree.

“As long as investors remain worried about what the future may bring, Treasury yields, and, by extension, mortgage rates are going to have a tough time falling and staying down,” Channel said.

Student loan borrowers will get less relief from rate cuts. Federal student loan rates are fixed, so most borrowers won’t be immediately affected. (Efforts to forgive student debt are now likely off the table.)

However, if you have a private loan, those loans may be fixed or have a variable rate tied to the Treasury bill or other rates. As the Fed cuts interest rates, the rates on those private student loans will come down over a one- or three-month period, depending on the benchmark, according to higher education expert Mark Kantrowitz.

Still, a quarter-point cut will only cut monthly payments on variable-rate loans by “about $1 to $1.25 a month for each $10,000 in debt,” Kantrowitz calculated.

Eventually, borrowers with existing variable-rate private student loans may be able to refinance into a less expensive fixed-rate loan, he said. But refinancing a federal loan into a private student loan will forgo the safety nets that come with federal loans, such as deferments, forbearances, income-driven repayment and loan forgiveness and discharge options.

Additionally, extending the term of the loan means you ultimately will pay more interest on the balance.

As a result of Fed rate hikes, top-yielding online savings account rates have made significant moves and are still paying more than 5% — the most savers have been able to earn in nearly two decades — up from around 1% in 2022, according to Bankrate.

“Yes, interest earnings on savings accounts, money markets, and certificates of deposit will come down, but the most competitive yields still handily outpace inflation,” McBride said.

One-year CDs are now averaging 1.76% but top-yielding CD rates pay more than 4.5%, according to Bankrate, nearly as good as a high-yield savings account.

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President-elect Donald Trump won Tuesday’s presidential election partly by addressing Americans’ economic anxieties over higher prices.

Nearly half of all voters said they were worse off financially than they were four years ago, the highest level in any election since 2008, according to an NBC News exit poll.

But a cornerstone of Trump’s economic policy — sweeping new tariffs on imported goods — would likely exacerbate the very Biden-era inflation Trump lambasted on the campaign trail, according to economists.  

There’s still much uncertainty around how and when such tariffs might be implemented. If they were to take effect, they would likely raise prices for American consumers and disproportionately hurt lower earners, economists said.

The typical U.S. household would pay several thousand more dollars each year on clothing, furniture, appliances and other goods, estimates suggest.

“It’s bad for consumers,” said Mark Zandi, chief economist at Moody’s. “It’s a tax on consumers in the form of higher prices for imported goods.”

“It’s inflationary,” he added.

He and other economists predict the proposed tariffs would also lead to job loss and slower economic growth, on a net basis.

The Trump campaign didn’t immediately respond to a request for comment from CNBC on the impact of tariffs or their scope.

Tariffs have been around for centuries. However, their importance as a source of government revenue has declined, especially among wealthy nations, according to Monica Morlacco, an international trade expert and assistant professor of economics at the University of Southern California.

Now, the U.S. largely uses tariffs as a protectionist policy to shield certain industries from foreign competition, according to the Brookings Institution, a think tank.

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Trump imposed some tariffs in his first term — on washing machines, solar panels, steel, aluminum and a range of Chinese goods, for example. The Biden administration kept many of those intact.

However, Trump’s proposals from the campaign trail are much broader, economists said.

He has floated a 10% or 20% universal tariff on all imports and a tariff of at least 60% on Chinese goods, for example. Last month, the president-elect suggested vehicles from Mexico have a tariff of 200% or more, and in September threatened to impose a similar amount on John Deere if the company were to shift some production from the U.S. to Mexico.

“To me, the most beautiful word in the dictionary is ‘tariff,'” Trump said at the Chicago Economic Club in October. “It’s my favorite word. It needs a public relations firm.”

A 20% worldwide tariff and a 60% levy on Chinese goods would raise costs by $3,000 in 2025 for the average U.S. household, according to an October analysis by the Tax Policy Center. Trump’s plan would reduce average after-tax incomes by almost 3%, according to the tax think tank.

Additionally, a 200% Mexico-vehicle tariff would increase household costs by an average $600, TPC said.

American consumers would lose $46 billion to $78 billion a year in spending power on apparel, toys, furniture, household appliances, footwear and travel goods, according to a National Retail Federation analysis published Monday.

“I feel pretty confident saying [tariffs] are a price-raising policy,” said Mike Pugliese, senior economist at Wells Fargo Economics. “The question is just the magnitude.”

The reason for these higher costs: Tariffs are paid by U.S. companies that import goods. The “vast majority” of that additional cost is passed on to American consumers, while only some of it is paid for by U.S. distributors and retailers or by foreign producers, said Zandi of Moody’s.

Philip Daniele, president and CEO of AutoZone, alluded to this dynamic in a recent earnings call.

“If we get tariffs, we will pass those tariff costs back to the consumer,” Daniele said in September.

The U.S. imported about $3.2 trillion of goods in 2022, for example, said Olivia Cross, a North America economist at Capital Economics. A back-of-the-envelope calculation suggests a 10% across-the-board tariff would be roughly equivalent to a $320 billion tax on consumers, Cross said.

Trump has proposed various tax breaks on the campaign trail. Additionally, tax cuts enacted by Trump in 2017 are due to expire next year, and tariff revenue may potentially be used to extend them, should Congress pass such legislation, economists said.

However, the typical U.S. household would still lose $2,600 a year from Trump’s tariff plan, even after accounting for an extension of the 2017 tax cuts, according to an analysis by the Peterson Institute for International Economics.

The U.S. economy would also likely suffer due to other tariff “cross currents,” Zandi said.

While U.S. companies that financially benefit from protectionist tariff policies may add jobs, the total economy would likely shed jobs on a net basis, Zandi said.

This is because countries on which the U.S. imposes tariffs would likely retaliate with their own tariffs on U.S. exports, hurting the bottom lines of domestic businesses that export goods, for example, Zandi said.

Higher prices for imported goods would likely also lead to lower consumer demand, weighing on business profits and perhaps leading to layoffs, he said.

In June, the Tax Foundation estimated Trump’s tariff plan would shrink U.S. employment by 684,000 full-time jobs and reduce its gross domestic product, a measure of economic output, by at least 0.8%.

Capital Economics expects the Trump administration would introduce tariffs — and a curb on immigration — in the second quarter of next year, the group said in a note Tuesday night. Together, those policies would cut Gross Domestic Product growth by about 1% from the second half of 2025 through the first half of 2026 and add 1 percentage point to inflation, it said.

Former President Donald Trump has defeated Vice President Kamala Harris to win the White House, which could broadly impact taxpayers — but the details remain unclear, according to policy experts.

Enacted by Trump in 2017, the Tax Cuts and Jobs Act, or TCJA, will be a key priority for the president-elect in 2025. The law brought sweeping changes, including lower tax brackets, higher standard deductions, a more generous child tax credit and bigger estate and gift tax exemption, among other provisions.

Those individual tax breaks will sunset after 2025 without action from Congress, which could trigger higher taxes for more than 60% of taxpayers, according to the Tax Foundation. However, Trump wants to fully extend expiring TCJA provisions.

Plus, most of Trump’s tax policy requires Congressional approval, which could be challenging, depending on control of the Senate and House of Representatives and support within the Republican party.

While Republicans secured a Senate majority, control of the House remains uncertain. If Democrats flip the House, we could see “more gridlock” in Congress, which could stall Trump’s agenda, Gleckman explained.

Tax negotiations could also be tough amid growing concerns about the federal budget deficit, according to Erica York, senior economist and research manager with the Tax Foundation’s Center for Federal Tax Policy. 

“The budget math is a lot harder this time around than it was back in 2017,” with higher interest rates and a bigger baseline budget deficit, she said. The deficit topped $1.8 trillion in fiscal 2024. 

Fully extending TCJA provisions could decrease federal revenue by $3.5 trillion to $4 trillion over the next decade, depending on the scoring model, according to the Tax Foundation.