JPMorgan, Citi, Wells Fargo and Bank of America cut prime rates to 7.25% after Fed’s 25 bps move, easing credit costs amid weak jobs.
Banks have reacted quickly
JPMorgan Chase, Citigroup, Wells Fargo and Bank of America on Wednesday announced cuts to their prime rates from 7.50% to 7.25%. The rate is used for the most reliable borrowers and is used as a basis for calculating rates on mortgages, credit cards and business loans.
Why the change of course
The Fed cut interest rates by 25 basis points, its first since December last year. It signals that the focus is now on the risks of slowing economic growth and rising unemployment, even as inflation remains above its 2% target.
“The summer began with expectations of stable rates, but the labor market has turned out to be weaker than expected. The number of unemployment claims is now at its highest level in almost four years,” said Richard Flynn of Charles Schwab UK.
What this means for the economy
Cheaper loans could stimulate demand for loans and boost small business lending, which has been reduced by high rates. This could potentially support hiring and consumer spending.
However, risks remain. JPMorgan CEO Jamie Dimon warned that the full impact of tariffs, immigration policies, geopolitical factors and Donald Trump’s tax and budget package is still difficult to assess.
Goldman Sachs Chairman David Solomon also stressed that tariffs “are definitely having an impact on economic growth.”
Related: Dollar Hits Four-Year Low Against Euro Ahead of Fed Rate Decision
