Rate Cut

The Federal Reserve Board has lowered the target rate for the federal funds rate by 0.25% to a new range of 4.0-4.25%. In announcing the reduction—the first of 2025—Fed Chair Jerome Powell cited concerns about the labor market as the primary reason for the reduction and signaled that one or two more reductions to the target rate are likely this year.

Analysis and eternal perspective: “The Fed lowered interest rates.” It is likely you have read that, and perhaps even said it. Technically, however, the Federal Reserve Board does not set the rate you pay on any of your consumer debt (mortgage, car loans, credit cards, etc.). The federal funds rate is the rate commercial banks pay each other when they borrow from each other to meet reserve requirements. This rate does, however, have a trickle-down impact on the rate you pay if you were to acquire new consumer debt.

Most of the coverage of this story, however, will have little to do with the above and will instead focus on the political dispute (largely between U.S. President Donald Trump and Fed Chair Powell). We’ve written previously about the ongoing effort to fire board member Lisa Cook, and newly-appointed board member Stephen Miran was the lone dissenting vote this week, preferring a larger 0.5% reduction.

We say it regularly here at The Equipped: The policy decisions of the world’s superpower matter. That includes economic decisions such as the federal funds rate. These are issues worth understanding, and in some cases worth factoring into your decision making.

They do not, however, impact your eternity, and this reality should dictate your level of fixation on them (translation: the federal funds rate should have no impact on your peace).

“And the peace of God, which transcends all understanding, will guard your hearts and your minds in Christ Jesus” (Philip. 4:7).

The following article originally appeared in Thann’s “The Equipped” Weekly Newsletter. For more information on Thann’s weekly email, click here.