Once the Federal Reserve lowers interest rates, will that give average Americans some financial relief? Perhaps. But a lot will depend on how much lower rates go from here.
The Fed is widely expected to cut interest rates Wednesday. As a result, longer-term US Treasury yields -- such as the 10-year -- have already come down sharply this year. They started 2019 around 2.66% and currently sit at about 2.06%.
The 10-year is closely watched because it impacts rates for several kinds of consumer loans, most notably mortgages. And as the 10-year has fallen, so have mortgage rates.
The average national rate for a 30-year fixed mortgage now stands at 3.75%, according to Freddie Mac. That's down from 4.5% at the beginning of the year.
Fed rate cuts could also lower rates for credit card debt, home equity lines of credit and auto loans. That's all good news.
But there's one big problem that is a direct result of lower rates.
Lower rates punish savers. That's because rate cuts allow banks to reduce the amount of interest they pay to hold your deposits. According to the FDIC, the average bank savings account yields a paltry 0.09%. A checking account is even worse, paying just 0.06%. And it's not much better for money market accounts. They yield a puny 0.18%.
Those rates will likely head even lower if the Fed starts a series of rate cuts. Again, that would be great news for people with a lot of debt. But for those trying to save money? Not so much.