On Wednesday, officials at the Federal Reserve surprised markets by declaring they were in the early stages of winding down the central bank’s war on inflation, a move that had swift and far-reaching consequences for financial markets and household budgets alike.

In official projections, Fed policymakers all but declared victory against inflation, saying they no longer expected to raise the benchmark fed funds rate above the 22-year high where it currently stands. They also increased their projections for rate cuts next year, and have begun talking about when those cuts might start, formerly a taboo subject.

The Fed had raised rates steadily from March 2022 through July of this year, pushing up borrowing costs on all kinds of other loans, in an effort to stifle the steep post-pandemic price increases for all kinds of consumer goods and services. While the Fed held rates steady at its two previous meetings, just as it did on Wednesday, comments from Fed Chairman Jerome Powell and the projections issued by Fed officials seemed to mark a turning point in the Fed's thinking.

Here’s how the Fed’s change of heart could affect your wallet:

Stocks got more valuable

The Fed’s announcement was music to the ears of stock traders, who sent the Dow Jones Industrial Average surging to a record high on Wednesday, while the S&P 500 and Nasdaq Composite indexes each gained 1.4%. Stocks continued their winning ways on Thursday, boosted by a strong retail sales report.

“The most hotly anticipated central bank meeting of the year did not disappoint on Wednesday, with the Fed potentially delivering this year's Santa rally,” Craig Erlam, senior market analyst at OANDA, wrote in a commentary. “

The fed funds rate influences all kinds of other interest rates throughout the economy, including mortgages, credit cards, car loans, and business loans. Broadly speaking, a higher fed funds rate makes borrowing more expensive, and a lower rate means more easy money. The prospect of cheaper borrowing implies more spending by businesses and individuals, which drives up stock values.

Home loans are getting cheaper

One of the specific ways lending got cheaper: mortgages got slightly more affordable. This week, the average rate for a 30-year mortgage fell below 7% for the first time since August, Freddie Mac said Thursday. What’s more, the slide of mortgage rates from their late October recent peak of near 8% will likely continue into next year, economists said.

To put that in perspective, the monthly mortgage and interest payment on a median-priced home (going by data from the National Association of Realtors) would be $2,075 at a typical rate being offered Wednesday, assuming a 20% down payment, down $179 from when rates were at their recent peak in October for the same priced home. 

“Mortgage rates will continue to ease in 2024 as inflation improves and Fed rate cuts get closer,” Realtor.com Chief Economist Danielle Hale wrote in a commentary. “Mortgage rates could near 6.5% by the end of the year, a key factor in starting to provide affordability relief to homebuyers.”

Mortgage rates fell because the announcement put downward pressure on yields for 10-year Treasurys, which heavily influence mortgage rates. Yields are swayed by investor concerns about inflation, and potential anti-inflation rate hikes by the Fed. Right after the announcement, yields, which had topped 5% in October, dived, dipping below 4% on Thursday for the first time since July.

Those super high rates for conservative savers may not be long for this world

Lower interest rates aren’t purely good news for your budget, however—the opportunity to earn the highest interest rates in decades on certificates of deposit, high yield savings accounts, and other risk-free investments is quickly drying up. A few weeks ago, savers could get 6% returns on a CD, but as of Wednesday, the best available had fallen to 5.76%, according to CD rate data tracked by Investopedia.