The Federal Reserve is finally lowering rates | Here's what consumers should know

The Federal Reserve has cut its benchmark interest rate from its 23-year high, with consequences for debt, savings, auto loans, mortgages and other forms of borrowing by consumers and businesses.

On Wednesday, the Fed announced that it reduced its key rate by an unusually large half-percentage point, to between 4.75 and 5 percent, the first rate cut in more than four years.

The central bank is acting because, after imposing 11 rate hikes dating back to March 2022, it feels confident that inflation is finally mild enough that it can begin to ease the cost of borrowing. At the same time, the Fed has grown more concerned about the health of the job market. Lower rates would help support the pace of hiring and keep unemployment down.

More Fed rate cuts are expected in the coming months, with the steepness of the reductions dependent on the direction of inflation and job growth.