(NewsNation) — The Federal Reserve has cut its benchmark interest rate for the first time in more than four years, which will have consequences for mortgage rates, car loans and credit card debt.

The Fed’s half-point rate cut is a major strategic shift and a sign policymakers believe they’re winning the war against inflation.

Wednesday’s cut lowers the federal funds rate into a range of 4.75% to 5%, down from its prior range of 5.25% to 5.5%. That shift may seem subtle, but with more cuts expected, lower mortgage rates and better credit card rates could be on the horizon.

Ultimately, the health of the overall economy will determine how much rates improve, but the Fed’s key interest rate will continue to affect Americans’ wallets.

Here’s how inflation and the cost of borrowing have changed since the Fed started raising interest rates in March 2022.

How has inflation changed?

After peaking at 9.1% in June 2022, inflation has eased, falling to a three-year low of 2.5% in August, just above the Fed’s 2% target rate.

The Fed rapidly raised rates to crush inflation, and on that front, progress has been made.

In a statement Wednesday, the Fed said it “has gained greater confidence that inflation is moving sustainably toward 2%.” That’s the closest the central bank has come to declaring victory in the fight against inflation.

Nevertheless, consumers are still reeling from high grocery prices and increased housing costs, which continue to rise, albeit at a much slower pace.

Grocery prices are up more than 20% since the start of 2021, while rents have increased more than 22% over the same period, according to the Consumer Price Index.

How have mortgage rates changed?

After climbing to a 23-year high of 7.79% in October 2023, the average 30-year mortgage rate has hovered around 7% for much of the past year, though it’s dropped in recent months.

Last week, the rate fell to 6.20%, the lowest level in 19 months but still more than double what it was three years ago.

As the Fed’s key interest rate ticked up, so did mortgage rates. The upswing cooled the U.S. real estate market as homeowners with lower rates became “locked in.”

More relief could be coming as the Fed kicks off a series of rate cuts, but that doesn’t mean pandemic-era mortgage rates are around the corner.

“Barring an outright economic calamity, we’re not going back to the 2.5 or 3% mortgage rates that we saw in 2020 and 2021,” said Greg McBride, chief financial analyst at Bankrate.

He thinks the low 5% range is more realistic, but even that is contingent on a soft economic landing.