Quick Read
- The Federal Reserve cut its benchmark rate to 3.75%-4%, its lowest since 2022.
- Associated Banc-Corp lowered its prime rate from 7.25% to 7.00% effective October 30, 2025.
- Borrowing costs like credit card and auto loan rates have dropped slightly, but remain historically high.
- Savings account and CD yields are slipping, though still above inflation.
- Mortgage rates have retreated, but home affordability challenges persist.
Federal Reserve Cuts Interest Rates: A Shift in Economic Strategy
On October 29, 2025, the Federal Reserve made headlines by lowering its benchmark interest rate for the second consecutive meeting. The Federal Open Market Committee (FOMC) trimmed the rate by a quarter percentage point, landing at a new target range of 3.75%-4%. This move signals a shift in priorities: the Fed is focusing more on protecting the job market and shielding the U.S. economy from recession than on fighting inflation—at least for now.
Since post-pandemic inflation drove rates to a two-decade high, the Fed has now enacted five cuts. But the path forward is far from certain. Internal divisions are growing: some policymakers push for steeper cuts, while others urge caution. Fed Chair Jerome Powell made it clear that another rate cut in December is not a done deal, highlighting the current uncertainty. According to Powell, the committee is torn between the risks of rising inflation and a stagnant labor market, especially with hiring slowing and unemployment lingering.
The ongoing federal government shutdown has only muddied the waters. Without fresh data on jobs, inflation, and spending, the Fed is essentially flying blind, making future decisions harder to predict.
Prime Rate Follows Fed’s Lead: Associated Banc-Corp Responds
In the wake of the Fed’s decision, major banks are adjusting their own rates. Associated Banc-Corp, a leading Midwest banking franchise, announced it has lowered its prime rate from 7.25% to 7.00%, effective October 30, 2025. This prime rate is the benchmark for many consumer loans and credit cards, and its movement mirrors changes in the Fed’s policy rate.
As the largest bank holding company in Wisconsin, Associated Banc-Corp’s prime rate adjustment is likely to ripple through its network of nearly 200 banking locations and influence lending costs for thousands of customers. But what does this mean for everyday Americans? Let’s break it down.
Borrowers: Lower Rates, Limited Relief
When the Fed and banks cut rates, borrowing should become cheaper. In practice, though, the impact can be subtle. Credit card APRs, which are closely tied to the prime rate, have dropped slightly—from 20.51% to 20.01% over the past year, according to Bankrate. For someone making minimum payments on an average $6,473 card balance, that change means saving about $1.35 a month—a barely noticeable difference.
Other loans, like home equity lines of credit (HELOCs) and auto loans, have also eased, but remain historically high. For example, the average new car loan rate fell from 7.62% in September 2024 to around 7% now. If you’re financing a typical $42,000 car over five years, a quarter-point drop in rates saves you just $5 a month.
Fixed-rate loans aren’t affected by these changes, and the real savings for borrowers come from personal financial improvements—like boosting credit scores or increasing down payments—rather than rate cuts alone. As Stephen Kates, a financial analyst at Bankrate, puts it: “Improving your score and strengthening your loan eligibility are firmly within your control and among the most effective ways to lower your borrowing rate.”
Savers: Yields Slip, But Remain Strong
Rate cuts usually spell bad news for savers. Banks earn less from reserves held at the Fed, so they tend to reduce yields on savings accounts and certificates of deposit (CDs). Since the Fed started cutting rates in September 2024, average savings rates have slipped from 0.53% to 0.48%.
Online banks, which often offer higher returns, have seen sharper declines. The top high-yield savings account dropped from 5.55% APY in July 2024 to 4.26% at the end of October. CDs, especially short-term ones, have also fallen: 1-year CD yields dropped from 5.36% to 4.05% over the same period. Anticipation of Fed cuts often drives these yields lower even before official decisions are made.
Yet, there’s a silver lining. Savings yields remain higher than they’ve been in over a decade and are still outpacing inflation—a rare occurrence in recent years. Online banks can offer better rates due to lower overhead, and FDIC insurance protects these deposits, making them a safe choice for savers.
Homeowners and Homebuyers: Mortgage Rates Retreat, Affordability Remains Challenging
Mortgage rates, which don’t move directly with the Fed but track the 10-year Treasury yield, have finally started to retreat. The average rate on a 30-year fixed mortgage is now 6.26%, the lowest in a year and down from a peak of 7.19% in January. For would-be homeowners, this translates into substantial monthly savings—a $500,000 loan now costs about $300 less per month compared to earlier in the year.
However, experts like Odeta Kushi from First American Financial Corporation caution that rates may not fall much further. She predicts they’ll hover between 6.3% and 6.5% through 2026, rarely dropping below 6%. High rates are just part of the affordability equation: home prices remain elevated, with the median existing home selling for $415,200 in September 2025.
Still, there are signs of improvement. Incomes are rising faster than home prices, and homes are staying on the market longer. But affordability is still well below pre-pandemic levels, and relief will take time. Kushi advises against trying to time the market, emphasizing that “affordability is starting to improve, but it’s a slow process.”
Investors: Stock Market Surges Amid Uncertainty
Amid rate cuts and economic shifts, the stock market has rallied. The S&P 500 is up nearly 18% this year, buoyed by enthusiasm for artificial intelligence, solid economic data, and a more dovish Fed. But as valuations climb, concerns about a potential bubble are growing. Even Fed Chair Powell has acknowledged that equity prices are “fairly highly valued.”
Ryan Detrick, chief market strategist at Carson Group, advises investors to stay diversified and not overreact to short-term volatility. “Every year has scary headlines and volatility,” he says. “If you know that going in, you’re less likely to make rash decisions.”
For long-term investors, the key is discipline. Volatility is the price paid for opportunity, and diversification remains the best defense against uncertainty.
Looking Ahead: What’s Next for Rates and the Economy?
The future of interest rates remains uncertain. Policymakers are divided, economic data is scarce due to the government shutdown, and inflation is heating up again. While recent rate cuts have brought some relief, their effects are uneven and limited. Borrowers may see slightly lower costs, but savers face shrinking yields. The housing market is showing signs of improvement, but affordability challenges persist. Meanwhile, the stock market continues its upward march, even as risks loom.
As banks like Associated Banc-Corp adjust their prime rates, the broader economy will continue to feel the ripple effects. For now, consumers and investors should focus on what they can control—improving financial health, shopping for the best rates, and staying disciplined in the face of uncertainty.
The latest prime rate reductions illustrate the complex balancing act facing both policymakers and financial institutions: stimulating growth without fueling inflation, and supporting consumers through volatile times. As the data landscape shifts, vigilance and adaptability will be key for everyone—borrowers, savers, and investors alike.