The U.S. economy appears to be losing some of the steam that had already pushed it to record highs in the first half of this year. Recently, growth has slowed, hiring has taken a slight decrease, and unemployment has ticked up, though it remains incredibly low by historical standards. Moreover, inflation has again risen and continues to be higher than the Fed’s long-term goal.

In response, the Federal Reserve  last month announced it will lower its key interest rate by a quarter of a percentage point, setting the new target at 4%. So what does this rate even mean? This rate influences borrowing costs for everything from credit cards to car loans and mortgages. This means that people who need to borrow money could do so for a bit cheaper.

Fed officials said that the decision reflects growing concern that the job market may be weakening and that the overall economy could slow further. Their goal is to support job growth while bringing inflation back down to 2%, the level the Fed considers “healthy” for the economy.

The Federal Reserve, also known as the central bank, also plans to continue to reduce the large amounts of government bonds and mortgage-backed securities it purchased in recent years.

In the future, the Fed said it will keep a close watch on new data on inflation, jobs, prices and global economic trends when deciding whether to cut rates further or pause. Prediction markets, such as Kalshi, predict another rate cut, with 83% of traders believing there will be a rate cut in October.