The Fed uses interest rates as a lever to grow the economy or to put the brakes on it. If the economy is slowing, the Fed lowers interest rates to make it cheaper for businesses to borrow money, invest, and create jobs. Lower interest rates also allow consumers to borrow and spend more, which also helps spur the economy.

The Fed lowers the fed funds rate to stimulate the economy by making it cheaper to borrow money. Rates on credit cards and home equity lines of credit track the fed funds rate closely and provide more spending power for Americans.

The latest Fed rate cut lowers interest rates by 100 basis points, compared to 50 basis points from the March 4 rate cut. This will likely cause a 1% decrease in interest rates on many financial products, such as credit cards, mortgages, loans, savings accounts and more.

Typically, when the Fed lowers interest rates, it signals that economic growth is slowing. Lower interest rates encourage more qualified borrowers to take out loans or open new lines of credit. For consumers, this can result in more home-purchasing power if they are looking to mortgage a new home or refinance an existing mortgage.