The Fed could do something today it has not done in 16 years – here’s what it means for your 401(K), loans, credit card and mortgage

Fed observers do not yet know how big the rate cut the central bank will make at the end of its latest meeting on Wednesday.

Normally, markets have a general idea of ​​what will happen at the meeting, but that is not the case this time.

“I hope they cut 50 basis points, but I suspect they’ll cut 25. I’m hoping for 50 because I think interest rates are just too high,” said Mark Zandi, chief economist at Moody’s Analytics. CNBC.

“They’ve achieved their mandate for full employment and inflation back to target, and that’s not consistent with a five-and-a-half percent interest rate target. So I think they need to normalize interest rates quickly and they need to have a lot of room to do that.”

There is reportedly an unusual division among Fed policymakers, who typically vote similarly when deciding on interest rates.

“I think they’re divided,” former Dallas Fed President Robert Kaplan told the newspaper earlier this week.

“There will be people at the table who, like me, feel like they’re a little late. They’re eager to get ahead and don’t want to spend the fall chasing the economy.”

There will be others, he added, who will want to be more cautious and manage risks.

Investors are anxiously awaiting whether the Fed will cut rates by a cautious quarter of a percentage point or a bold half of a percentage point. The Fed has not done that in 16 years.

The Fed has not cut borrowing costs this much since the start of the financial crisis in late 2008.

At the time of writing, investors were predicting a 57 percent chance of a 50 basis point rate cut and a 43 percent chance of a 25 basis point rate cut, according to the CME FedWatch Tool.

Every rate cut, no matter how large, has consequences for Americans’ finances — from credit cards and savings accounts to 401(k) accounts and mortgages.

The Fed has kept benchmark borrowing costs at a 23-year high of 5.25 percent to 5.5 percent since July 2023 after aggressively raising rates to curb inflation.