(NewsNation) — The Federal Reserve has cut its benchmark interest rate for the first time in more than four years, which will have consequences for mortgage rates, car loans and credit card debt.

The Fed’s half-point rate cut is a major strategic shift and a sign policymakers believe they’re winning the war against inflation.

Wednesday’s cut lowers the federal funds rate into a range of 4.75% to 5%, down from its prior range of 5.25% to 5.5%. That shift may seem subtle, but with more cuts expected, lower mortgage rates and better credit card rates could be on the horizon.

Ultimately, the health of the overall economy will determine how much rates improve, but the Fed’s key interest rate will continue to affect Americans’ wallets.

Here’s how inflation and the cost of borrowing have changed since the Fed started raising interest rates in March 2022.

How has inflation changed?

After peaking at 9.1% in June 2022, inflation has eased, falling to a three-year low of 2.5% in August, just above the Fed’s 2% target rate.

The Fed rapidly raised rates to crush inflation, and on that front, progress has been made.

In a statement Wednesday, the Fed said it “has gained greater confidence that inflation is moving sustainably toward 2%.” That’s the closest the central bank has come to declaring victory in the fight against inflation.

Nevertheless, consumers are still reeling from high grocery prices and increased housing costs, which continue to rise, albeit at a much slower pace.

Grocery prices are up more than 20% since the start of 2021, while rents have increased more than 22% over the same period, according to the Consumer Price Index.

How have mortgage rates changed?

After climbing to a 23-year high of 7.79% in October 2023, the average 30-year mortgage rate has hovered around 7% for much of the past year, though it’s dropped in recent months.

Last week, the rate fell to 6.20%, the lowest level in 19 months but still more than double what it was three years ago.

As the Fed’s key interest rate ticked up, so did mortgage rates. The upswing cooled the U.S. real estate market as homeowners with lower rates became “locked in.”

More relief could be coming as the Fed kicks off a series of rate cuts, but that doesn’t mean pandemic-era mortgage rates are around the corner.

“Barring an outright economic calamity, we’re not going back to the 2.5 or 3% mortgage rates that we saw in 2020 and 2021,” said Greg McBride, chief financial analyst at Bankrate.

He thinks the low 5% range is more realistic, but even that is contingent on a soft economic landing.

How have credit card rates changed?

From May 2022 to May 2024, credit card interest rates rose from 15% to 21%, the highest level in at least three decades, according to Federal Reserve data.

Interest rates on retail credit cards are even worse, now at a record 30.45%, according to a recent Bankrate study.

With the surge in borrowing costs, Americans have racked up more than $1.14 trillion in credit card debt.

In 2023, the average credit card balance stood at $6,501, up 10% from the year prior, according to Experian.

Even with the Fed’s rate cut, McBride said addressing credit card debt should remain a priority for those who have it.

“Borrowers should continue aggressively paying down high-cost credit card debt and utilize zero percent or other low-rate balance transfer offers to turbocharge debt repayment efforts,” he said.

How have car loans changed?

The rate on a 60-month new car loan has nearly doubled since the Fed began raising interest rates in March 2022.

The average rate for 60-month loans increased from 4.52% in Feb. 2022 to 8.20% in May 2024, per Fed data. Rates on used car loans are even higher at 11.3%, according to Edmunds.

Meanwhile, other costs that come from owning a car have also shot up recently. Car insurance prices are up 16.5% from a year ago. Repairs have also become significantly more expensive in recent years.

Robert Frick, corporate economist for Navy Federal Credit Union, told The Associated Press that the Fed’s rate cut will eventually work its way into auto loans, but it could take some time.

“Rates will be coming down, but we shouldn’t expect them to come down quickly overall,” he said.

Frick suggested waiting for additional rate cuts to come through if possible, especially if you’re buying a used vehicle.