It’s been a long and bumpy road to the Federal Reserve’s first interest rate cut in more than four years – a moment that could be pivotal for the finances of millions of Americans.

On Wednesday, the Fed is expected to cut its benchmark interest rate, currently at its highest level in 23 years, after the central bank rolled out a series of rate hikes to curb the pandemic’s high inflation. While economists are unanimous in expecting a rate cut on Sept. 18, they are split between predicting a 0.25 percentage point cut and a 0.5 percentage point cut, according to financial data firm FactSet.

Regardless of the size of the cut, the Fed’s first rate cut since March 2020 will provide welcome relief for consumers looking to buy a home or car, as well as for those have expensive credit card debt. The decision is also likely to trigger a series of interest rate cuts later this year and into 2025, which could have a lasting impact on mortgage and car loan rates, but could also have the downside of reducing the relatively high returns that savers have recently benefited from.

“It’s been a long marathon – the Fed believes it’s time to cut rates again,” Sara Rathner, co-host of the Smart Money podcast and personal finance expert at NerdWallet, told CBS MoneyWatch. “Consumers are definitely feeling the impact. It’s that one-two punch of higher rates and inflation.”

Wednesday’s rate cut will “provide consumers with an opportunity to take a look at their finances and save money on some of their loans,” she said.

When is the Fed meeting in September 2024?

The Fed’s September 2024 meeting will be held from September 17 to 18. The central bank is expected to announce its interest rate decision on September 18 at 2 p.m. Eastern Time.

This will be followed by a press conference with Fed Chairman Jerome Powell at 2:30 p.m. Eastern Time, where Powell will discuss the central bank’s economic outlook.

Powell recently signaled that the central bank is ready to cut its benchmark interest rate. In a speech in August, he stated: “the time has come” for the Fed to adjust its monetary policy after Inflation fell below 3% on an annual basis and amid some signs of weakness in the labor market.

What extent of interest rate cut is expected?

This is the subject of great debate among economists. Some expect the Fed to cut its key interest rate by 0.25 percentage points – the usual cut in key interest rates – while others expect a massive cut of 0.5 percentage points.

Regardless of the amount, the rate cut will provide some relief to borrowers, albeit on a relatively small scale, since the Fed funds’ current target is in the range of 5.25 to 5.5 percent. A 0.25 percentage point cut would lower the target range to 5 to 5.25 percent, for example, and thus represent only a small reduction in borrowing costs.

“A rate cut alone is not a panacea for borrowers struggling with high financing costs and has minimal impact on overall household budgets,” noted Greg McBride, chief financial analyst at Bankrate, in an email. “More significant will be the cumulative effect of a series of rate cuts over time.”

Will the Fed cut interest rates later in 2024?

Very likely. Economists surveyed by FactSet are forecasting rate cuts at the Fed’s November and December meetings (there is no October meeting to decide rates). In addition, many economists expect the Fed to continue cutting rates throughout 2025. Most predict that the fed funds rate will be between 3% and 3.5% by May 2025, according to FactSet.

“Our baseline forecast is for three consecutive cuts of 25 basis points each in September, November and December and a final rate of 3.25 to 3.5 percent,” Goldman Sachs analysts wrote in a September 15 research note.

What impact will the interest rate cut have on mortgage rates?

Mortgage rates have risen sharply in line with the Fed’s rate hikes, with the 30-year fixed-rate loan above 7% in 2023 and earlier this year. This has made buying a home financially unaffordable for many potential buyers, especially as real estate prices continue to rise.

Mortgage rates have been falling even before the Sept. 18 rate decision, partly due to expectations of a cut as well as weaker economic data. The 30-year fixed-rate mortgage is currently at about 6.29%, the lowest rate since February 2023, according to the Mortgage Bankers Association.

But the Sept. 18 rate cut may not lead to another significant decline in interest rates, especially if the economy remains relatively strong, Orphe Divounguy, senior economist at Zillow, told CBS MoneyWatch.

“We expect mortgage rates to be around current levels by the end of the year,” he said.

Still, this could prove to be the right time for recently lagging homebuyers to enter the market, Divounguy added. That’s because housing affordability is improving while supply is rising after a decline in 2022, giving buyers more choice.

Some homeowners with mortgages above 7% should also consider refinancing to a lower interest rate, experts said. For example, a homeowner with a $400,000 mortgage could save about $400 a month by refinancing to a loan at today’s interest rate of about 6.3%, while the peak interest rate in 2023 is about 7.8%.

“In general, lenders recommend refinancing if the difference is one percentage point or more,” notes Smart Money’s Rathner.

What about car loans, credit cards and other debts?

Experts say auto loan rates will likely drop after the rate cut. And that could prompt some consumers to look for a new car, according to Edmunds. The company found that about 6 in 10 car buyers hold off on buying because of high interest rates.

According to Edmunds, the average annual percentage rate for a new car loan is currently 7.1 percent and for a used car loan is 11.3 percent.

“A Fed rate cut wouldn’t necessarily drive all of those consumers back to dealerships immediately, but it would certainly help revive the spending mood of reluctant car shoppers, especially when coupled with some of the promotional messaging that automakers typically run on Black Friday and through the end of the year,” Jessica Caldwell, director of insights at Edmunds, said in an email.

The effective annual interest rate for a new credit card offer is now at 24.92%the highest since LendingTree began tracking new interest rates in 2019, according to the financial services website. As with auto loans, credit card rates are also expected to fall after the rate cut.

But for people with credit, it might not make much of a difference, says Matt Schulz, a credit analyst at LendingTree. He calculates that someone with a $5,000 balance and a card with a 24.92 percent APR could save less than a dollar a month in interest if their APR were reduced by a quarter of a percentage point.

It is better, experts say, to pay off the debt if possible or look for a zero percent transfer card or a personal loan, as these usually come with a lower interest rate than credit cards.

About 4 in 10 Americans carry a credit card balance, according to Federal Reserve data. The average balance is about $6,900, according to LendingTree.

What impact will a Fed interest rate cut have on savings accounts and deposits?

If there is one good thing that has come out of the rate hikes, it is that savers have been able to benefit from high interest rates on certificates of deposit (CDs) and high-yield savings accounts. Some banks have offered annual percentage rates of up to 5%, giving Americans a chance to boost their savings accounts.

But this trend may finally be coming to an end, Schulz noted.

There is still time to take advantage of the relatively high interest rates, even if they fall slightly in the coming months, he added. “I don’t think anyone should expect interest rates to plummet immediately,” he said.

Nevertheless, some experts have predicted that the Top savings accounts could reduce interest rates by up to 0.75 percentage points after the Fed cut interest rates. However, consumers can still benefit from moving money from a traditional savings account to a high-yield savings account, which can help them build an emergency fund or boost their savings with higher returns.

As for CDs, Schulz recommends locking in interest rates now if possible. “Interest rates are already starting to fall and will continue to fall,” he said.