The Federal Reserve is expected to be stable at the end of next week’s two-day meeting, despite President Donald Trump’s comments on Thursday that he “demands that interest rates come down soon.”
So far, the central bank has slowly recalibrated policy after hiking 5.25 percentage points between 2022 and 2023 in an effort to fight inflation that has exceeded the Fed’s 2% mandate. I’m doing it. On the campaign trail, Trump said inflation and high interest rates were “destroying our country.”
But for consumers struggling under the weight of high prices and high borrowing costs, there is little relief in sight for now.
“Anyone hoping for the Fed to ride in the cavalry and rescue you from high interest rates right away is going to be really disappointed,” said Matt Schultz, chief credit analyst at Lendingtree. Ta.
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The federal funds rate, set by the U.S. central bank, is the rate at which banks borrow and lend overnight. Although it’s not a fee consumers pay, the Fed’s actions still affect borrowing and consumers see it every day.
When the Fed’s funds rate eventually falls, consumers may find it cheaper to borrow money as borrowing costs decrease on a variety of loans, such as mortgages, auto loans, and credit cards.
Here’s a breakdown of how it works:
credit card
Most credit card rates vary and are directly connected to the Fed’s benchmark. But even though the central bank cut benchmark interest rates entirely last year, credit card costs remained elevated.
Greg McBride, chief financial analyst at Bankrate, said card issuers are often slower to respond to a decrease in the Fed rate than an increase.
Currently, the average credit card rate is over 20%, according to Bankrate.
In the meantime, delinquencies are high, with billholders only recently making their lowest bill payments for the first time in 12 years, according to a Philadelphia Federal Reserve report.
“That means managing that high-yield debt is more important than ever,” Schulz said.
mortgage fees
Even with the Fed cuts, mortgage rates have been rising in recent months.
15-year and 30-year mortgage rates are fixed and tied primarily to Treasury yields and the economy, so they are not ranked down to Fed policy. Most people have fixed rate mortgages, so their rate won’t change unless you refinance or sell your current home and buy another property.
“Existing homeowners will not be affected because most mortgage debt is fixed,” Bankrate’s McBride said. “That adds to the affordability issue for would-be homebuyers and keeps sales on ice.”
According to Bankrate, the average rate for a 30-year fixed-rate mortgage is now 7.06%.
auto loan
Car loan rates are fixed. However, these debts are one of the fastest growing sources of consumer credit outside of mortgage lending. As car prices rise, payments get bigger, driving outstanding auto loan balances to more than $1.64 trillion.
According to Bankrate, the average fee for a five-year new car loan is currently around 7.47%.
“Any rate reductions in 2025 will be gradual, signaling that affordability challenges are likely to continue for most new vehicle buyers,” said Joseph Yun, consumer insights analyst at Edmunds.
“Further interest rate cuts in 2025 could provide some relief, but the continued upward trend in new vehicle pricing makes it difficult to predict significant improvements in consumer affordability in the new year. ” said Yoon.
student loan
Federal student loan rates are also fixed, so most borrowers are not immediately affected by the Fed’s moves.
However, undergraduate students who obtained direct federal student loans in 2024-25 will pay 6.53%, up from 5.50% in 2023-24. Interest rates for the next academic year are based in part on the 10-year Treasury May auction.
Private student loans tend to have variable interest rates that are tied to prime, Treasury bill, or another rate index. That means these borrowers typically pay more in interest. However, how much does it change depending on the benchmark?
savings rate
Although central banks do not directly influence deposit rates, yields tend to correlate with changes in the underlying federal funds rate.
As a result of the Fed’s series of rate hikes in recent years, top-yielding online savings accounts offer the highest returns in more than a decade, paying nearly 5%, according to McBride.
“The good thing about the Fed being on the sidelines is that savers will be able to enjoy these inflation-beating yields for some time to come,” McBride said.
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