What does the Fed cut mean for your personal borrowing costs? Dan Varoney is live

Episode Transcript

Speaker 1 (00:00):
John Mounts filling in for JT. And yesterday the Fed
made another rate cut. Here's Jerome Powell.

Speaker 2 (00:07):
Total PCEE prices rose two point eight percent over the
twelve months ending in September and excluding the volatile food
and energy categories. Core PCE prices also a rose two
point eight percent.

Speaker 1 (00:19):
And based on that, he decided that that would require
at another little nudge to drop the rates down another
point two five basis points. Joining us out to talk
about what this means to you in regards to your money,
your credit cards, your mortgage is Dan Vroni. He is
a strategist and the author of the number one Amazon
best selling book Rethinking Economic Growth. Dan, welcome to our show.

Speaker 3 (00:43):
John's a pleasure to be with you, and happy Thursday morning.

Speaker 1 (00:47):
Happy Thursday, indeed, and I guess this is a very
happy Thursday for those people out there who are working
in the mortgage business, or I guess maybe in the
banking business.

Speaker 3 (00:55):
You know. So it actually is. So let's look at
this first from a consumer perspective. So, if you've got
a variable rate mortgage, you're going to see a downward
hit positive hit, meaning you pay less on your mortgage.
For those with fixed rate auto loans, however, you're not
going to see anything different. If you've got a variable

(01:16):
rate auto loan, you could see a downward positive hit
and pay lower in your payments. Your credit card interest rates,
probably you're going to see a little bit of a dip,
which is also very very good sign. But with you know,
as they say, with some of the good news, there's
always a little bit of bad news. So for those

(01:37):
close to retirement or at retirement, if you've got money
and money markets, you're going to see those interest rates
down a bit. But overall, there have been three twenty
five basis point cuts this year, which is very good
news for consumers. Again, those with variable mortgages good news,

(01:57):
those with credit cards good news, and we're moving in
the right direction. But John, now that I said that,
let me talk about why it really matters to your listeners,
especially with small businesses if I might. My new book
came out two months ago. I did thirty five interviews
with thirty five small business owners around the country and

(02:18):
here's what I learned. That their biggest challenges around the
cost of regulations, and then right after that is access
to affordable capital. So when you think about the One
Big Beautiful Bill that President Trump signed into law this
past summer that goes into full effect soon meaning after
the first of the year, and they have access to

(02:39):
one hundred percent expensing for plants and equipment. Well, they
need to get loans. What these lower rates mean is
that they're going to have access to capital. It's going
to give me the ability to buy equipment. It's going
to give me the ability to build buildings. It's also
going to give them the ability to hire people. And
why that really matters for all of us is, as
you know, John, we've been seeing these layoffs and what

(03:02):
is a rapidly deterior and labor market. And why I'm
energized this morning is because with these lower interest rates
and the One Big Beautiful Bill moving into full effect,
we've got the ability to get jobs going through small businesses.
Two of three new private sector jobs come from small businesses.

(03:25):
Half the workforce comes from small businesses. Ninety nine point
nine percent of the companies in this country are small businesses.
Everyone in your listening area should be very energized by
about what's in front of us. But that being said,
I will tell you the Federal Reserve's work is not
done yet. My hope was that they were going to

(03:47):
reduce interest rates these Path three meetings by fifty basis
points apiece. So in my mind they're probably twenty five
to fifty basis points away because that would make capital
even more affordable for small businesses and in my mind,
small businesses and where we're at, where it's.

Speaker 1 (04:05):
At, Dan, grow jobs, Dan, how soon can we sorry
to interrupt, how soon could we see this actually take place?
Because there's a trickle down effect. Like you said, it's
even though they lower it by zero point two five points,
it's not like boom, it happens right away. Are we
looking like a month? Six months? How far out before
we start to see these rate increases trickle down to

(04:27):
borrowing and then businesses spending the money they were able
to borrow.

Speaker 3 (04:31):
Great questions. So a year ago at this time, the
Fair Reserve reduced interest rates by about seventy five business points.
We're seeing some of that now. It takes anywhere from
six months up to a year. But the reason why
I think that timeline is going to be accelerated, John,
is you've got small businesses wanting to make investments, and

(04:51):
with the big, beautiful bill right in front of them.
They've got the ability to access that capital because it's
at a lower cost, and I think that we could
see it sooner. What I expect, however, is I expect
to see the trickle down between January and June, more
likely at the end of the first quarter through the

(05:12):
end of the second quarter. So if you and I
were to talk on June thirtieth of next year, you
and I would be celebrating the trickle down effect of
these interest rates, return to growing jobs again, and improvement
in the economy.

Speaker 1 (05:26):
And this will likely line up very nicely. Because I
understand Jerome Powell, his term is about up. It sure
looks like Donald Trump's not going to reappoint him, and
if I had to guess Donald Trump will, he will
appoint somebody who is probably going to be more interested
in dropping it by another point five basis points, maybe
even more, and that will really get the economy on fire,
and it'll be in perfect timing for the midterm elections.

(05:48):
So that will all look very good for the leadership,
and it will also look very good for our economy.
And I guess that's in the end, that's why we're
all kind of cheering for something like this, because that
way we can not only get the economy going, but
also get the policies going that we want to see
implemented in this country. Thank you so much for joining
us this morning. That's Dan Vernie. He is the strategist

(06:09):
and author of the number one Amazon bestselling book Rethinking
Economic Growth.