Earlier today the Federal Reserve cut the federal funds rate a quarter of a point, from 2.25 to 2. The prime rate, used to determine the majority of HELOC interest rates, generally mimics the federal funds rate. So, HELOC customers may see a slight interest reduction in their future statements.
Some analysts speculate that this latest cut will be the last for some time. The federal funds rate is already very low and further decreases could escalate inflation.
The official statement from the Federal Reserve seems to indicate that they will proceed with caution in regard to additional cuts:
“Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook remains high. It will be necessary to continue to monitor inflation developments carefully.
The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.”
The benefit for current HELOC borrowers may not be immediate. To learn more about how these rate cuts may affect you see: Will Federal Rate Cuts Affect Your HELOC APR?