How Lower Interest Rates Might Impact Your Financial Plan

Written by Anthony Grower | Oct 9, 2025 3:31:09 PM

The Federal Reserve (Fed) has started lowering interest rates slightly, cutting the Federal Funds rate by 0.25% in September. Last year’s rate reductions were halted out of concern that new tariffs could drive prices higher. But with inflation holding steady and the job market softening, officials judged that the time was right to ease borrowing costs for households and businesses.

The Federal Funds rate is the short-term rate banks charge each other, and it sets the tone for borrowing costs across the economy. Even small adjustments to rates can affect how easy it is to get loans, how much you earn on savings, and how investments are valued.

What It Means for Borrowing

The most immediate effects will be seen in lending markets. Credit card and consumer rates may gradually ease, while mortgage rates could drift lower, creating opportunities for refinancing or new purchases. It also becomes easier for businesses to borrow money as loan costs go down. Even though the change is small, slightly lower rates can make it more appealing to take out bigger or longer-term loans.

What It Means for Saving

The picture is different on the savings side. Interest earned on savings products like money market accounts, certificates of deposit, and high-yield savings accounts may start to decrease. However, even with this adjustment, today’s cash returns remain significantly higher than what investors have experienced for much of the past two decades. This shift is a good reminder to think about how much cash you need on hand and whether extra money could be put to better use in long-term investments.

What It Means for Investing

Lower rates also matter for valuations. When interest rates fall, future company profits look more valuable, which can help boost stock prices, especially for companies focused on growth. Lower returns on cash and bonds may lead investors to focus more on stocks and other types of investments. Bond prices may rise as interest rates fall, and real estate could pick up again, thanks to more affordable loans.

Looking Ahead

The Fed has indicated it may lower rates again if the economy weakens, but it plans to move cautiously. For investors, the message is simple: rates are slowly going down, which may create new opportunities—but it’s still important to make sure your investments match your long-term goals.

This article was featured in the Fall 2025 edition of the Rising Dividend Report.

Read more articles from this issue here.

This has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of publication and are subject to change without notice. Past performance is not indicative of future results.

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