The Federal Reserve announced on Wednesday that it would not change interest rates.
The Fed’s decision comes amid a demand from President Donald Trump to lower the key borrowing rate benchmark and escalating an attack on Federal Reserve Chairman Jerome Powell hours before the announcement.
Trump has pressured Powell to cut interest rates, claiming that a Fed’s funding rate would make it difficult for businesses and consumers to access cash, putting an even greater strain on the US economy. However, Powell said that the federal fund rate is likely to remain high as the economy is changing and policies are in flux.
For now, it’s enough to keep the central bank on the sidelines, according to Greg McBride, Bankrate’s chief financial analyst. “There’s an ongoing sense of uncertainty about tariffs and how that will affect this month’s inflation measurements, that another shoe is about to fall,” McBride said.
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The federal fund rate sets what banks charge each other for lending overnight, but it also has a domino effect on almost every borrowing fee and savings rate that Americans see every day.
When the Fed hiked in 2022 and 2023, interest rates on most consumer loans quickly followed, including credit cards, car loans and home equity credit lines. The central bank reduced its benchmark rate three times in 2024, but these consumer rates are still rising and are staying mostly high for now.
“The borrowing rate is high, the mortgage rate is nearly 7%, and the credit line for many home equity in the double-digit interest area, and the average credit card rate is still above 20%,” McBride said. “However, savers continue to be rewarded with returns that hit the inflation of top savings accounts, money market accounts and certificates of deposits. Retireers in particular earn good income from their hard-earned savings.”
Five ways that the Fed can affect your wallet
1. Credit Card
Many credit cards come with a variety of rates, which means they are directly connected to the Fed’s benchmarks.
Interest rate cuts are likely to be postponed until at least September, so bank rates say the average credit card annual rate is currently above 20%, not far from last year’s record high. In 2024, banks raised credit card rates to record levels, with some issuers saying they were maintaining higher rates on those.
“Credit card rates are so high that it’s painful,” said Charlie Wise, Senior Vice President, Transunion and Head of Global Research and Consulting.
“The reality is that you can lower the Fed’s funding rate at two full points, and all you’re doing is lowering the interest rate from, say, 22% to 20%,” he said.
Experts say borrowers should switch to zero-in-test balance transfer credit cards or consolidate high-profit credit cards with low interest rate personal loans to pay off.
2. Car loan
Auto loan fees are linked to several factors, but the Fed is one of the most important.
According to Edmunds, the average rate of new car loans over five years was 7.3% over five years, and the average rate of used cars was 11%, as the Fed’s benchmarks remained consistent.
However, car prices are also rising. This is part of the pressure from Trump’s tariffs on imported vehicles, increasing monthly payments to car buyers and increasing the problem of affordability. According to separate data from Bank of America, 20% of households pay monthly car payments pay more than $1,000 a month.
“When sliced in any way, car buyers are struggling to find deals in today’s automotive market, and raising funds for new vehicles costs more shoppers.”
3. Home loan
Mortgage rates do not track the Fed directly, but are largely linked to the Treasury yields and the economy. As a result, these charges remain within the same narrow range for several months due to concerns about tariffs and ongoing uncertainty about future costs.
According to Mortgage News Daily, the average rate for a 30-year fixed-rate mortgage was 6.91% as of June 17th, while the fixed-rate rate for 2015 was 6.17%.
“We won’t see any major changes in the near future, meaning that those who buy a home this summer should expect interest rates to remain relatively high,” said Matt Schulz, chief credit analyst at Lendingtree.
Adjustable rate mortgages, or weapons, and home equity credit lines, or HELOCs, are fixed at the prime rate, and those rates are also higher.
4. Student loan
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Federal student loan fees are set once a year, based in part on the Treasury Notes auctions for the past decade in May and are fixed over the life of the loan, making most borrowers somewhat protected from the Fed’s moves and recent economic turmoil.
The current interest rate for undergraduate federal student loans issued by June 30th is 6.53%. From July 1st, interest rates will be 6.39%.
Borrowers with existing federal student debt balances do not see their fees change, but many now face other headwinds and federal loan exemption options.
5. Save money
While central banks do not directly affect deposit rates, yields tend to correlate with changes in eligible federal funding rates.
“The yields on CDs and high-yield savings accounts are not at the Sky High level a year ago, but they’re still really strong,” says Schulz of Lendingtree. According to the bank rate, online savings accounts, which currently pay averages over 4%, are well above the annual inflation rate.
“Shopping a high-yield savings account is one of the best financial moves you can do to take advantage of the high fees if you haven’t done it yet,” Schultz said.
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