Effects of the Federal Reserve's interest rate cut

The Federal Reserve cut its benchmark interest rate by a quarter point Wednesday for the third time since September, bringing its key rate to about 3.6%, the lowest in nearly three years.

- BY CORA LEWIS

Before September, it had gone nine months without a cut.

The benchmark rate is the rate at which banks borrow and lend to one another, and the Fed has two goals when it sets the rate: one, to manage prices for goods and services, and two, to encourage full employment. The benchmark rate also affects the interest rates consumers pay to borrow money via credit cards, auto loans, mortgages and other financial products.

Typically, the Fed might increase the rate to try to bring down inflation and decrease it to encourage faster economic growth, including by boosting hiring. The challenge now is that inflation remains higher than the Fed's 2% target, but the job market has cooled. The government shutdown had also prevented the timely collection and release of some data the Fed relies on to monitor the health of the economy.

Here's what to know:

Savings account interest will decline

For savers, falling interest rates will continue to erode attractive yields currently on offer with certificates of deposit and high-yield savings accounts.

Three of the big five banks (Ally, American Express and Synchrony) cut their savings account rates since the last Fed rate cut in October, according to Ken Tumin, founder of DepositAccounts.com. The top rates for high-yield savings accounts right now remain around 4.35% to 4.6%.