The Federal Reserve is expected to hold interest rates steady at the end of its two-day meeting next week, despite some encouraging news on inflation.
Although inflation receded last month, an escalating trade war threatens to cause prices to rise on a wide range of consumer goods going forward.
“This is likely just the beginning with tariffs on Europe and universal ones to follow suit over the coming weeks,” Andrzej Skiba, head of U.S. fixed income at RBC Global Asset Management, said in an email. “This will be inflationary, and the Fed won’t likely be able to cut rates in this environment.”
The federal funds rate sets what banks charge each other for overnight lending, but also affects many of the borrowing and savings rates Americans see every day.
“Consumers are stretched and stressed,” said Greg McBride, chief financial analyst at Bankrate.com.
Once the federal funds rate comes down, consumers may see their borrowing costs decrease across a variety of consumer debt such as auto loans, credit cards and mortgages, making it cheaper to borrow money.
But even with the Fed on the sidelines for now, households could see some relief. Already, rates for mortgages, auto loans and credit cards are edging lower. Still, these rates remain relatively elevated compared to recent highs, with credit card APRs down only slightly from an all-time record.
Here’s a look at where consumer borrowing costs stand.
Mortgages
Although 15- and 30-year mortgage rates are fixed, and largely tied to Treasury yields and the economy, rates have been trending lower for weeks.
Worries about a possible recession and increased uncertainty over President Donald Trump’s tariff plans have soured consumers’ outlook and dragged down rates, according to the Mortgage Bankers Association.
“The good news is that even though the Fed has taken its foot off the gas when it comes to rate cuts, mortgage rates have fallen,” said Matt Schulz, chief credit analyst at LendingTree.
The average rate for a 30-year, fixed-rate mortgage is now 6.77%, down from 7.04% at the beginning of the year, according to Bankrate.
Credit cards
Most credit cards have a variable rate, so there’s a direct connection to the Fed’s benchmark.
But even though the central bank held rates at the last few meetings, the average annual percentage rate has moved lower too — it’s currently, down to 20.09%, from 20.27% at the start of the year, thanks to the lingering effects of last year’s rate cuts.
“March was the sixth straight monthly decline, but the decreases have slowed as Fed rate cuts get further back in the rearview mirror,” Schulz said of credit card APRs.
In the meantime, credit card debt continues to be a pain point for consumers struggling to keep up with high prices. Revolving debt, which mostly includes credit card balances, is up 8.2% year over year, while nonrevolving debt, such as auto loans and student loans, is 3% higher, according to the Federal Reserve’s latest consumer credit report.
Auto loans
Although auto loan rates are fixed, those payments continue to grow because car prices are rising, in addition to pressure from trade policy uncertainty.
“That’s troubling news for potential car buyers, who are already beset on all sides by high rates and high prices and also face the possibility of tariffs pushing car costs even higher,” Schulz said.
However, auto loan rates have also backed down from recent highs. The average rate on a five-year new car loan is now 7.42%, down from 7.53% in January, according to Bankrate.
Student loans
Federal student loan rates are fixed, as well, so most borrowers are somewhat shielded from Fed moves and recent economic turmoil.
Undergraduate students who took out direct federal student loans for the 2024-25 academic year are paying 6.53%, up from 5.50% in 2023-24. Interest rates for the upcoming school year will be based in part on the May auction of the 10-year Treasury note.
Private student loans tend to have a variable rate tied to the prime, Treasury bill or another rate index.
Savings
On the upside, top-yielding online savings accounts have offered the best returns in more than a decade and currently pay 4.4%, on average, according to Bankrate.
While the Fed holds rates steady, “savings rates really haven’t changed all that much, that’s the good news,” said Bankrate’s McBride. “Savings rates are still at attractive levels and the top yields are still well in excess of inflation.”
