The Federal Reserve announced Wednesday it will leave interest rates unchanged.
The Fed decision comes amid demands from President Donald Trump to lower the key borrowing rate benchmark, and escalating attacks on Fed Chair Jerome Powell even hours before the announcement.
Trump has been pressuring Powell for a rate cut, arguing that maintaining a fed funds rate that is too high makes it harder for businesses and consumers to access cash, adding more strain to the U.S. economy. But Powell has said that the federal funds rate is likely to stay higher as the economy changes and policy is in flux.
That’s enough to keep the central bank on the sidelines, for now, according to Greg McBride, Bankrate’s chief financial analyst. “With the uncertainty around tariffs and how that could impact inflation readings in the month ahead, there’s an ongoing sense of another shoe about to drop,” McBride said.
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The federal funds rate sets what banks charge each other for overnight lending, but also has a domino effect on almost all of the borrowing and savings rates Americans see every day.
When the Fed hiked rates in 2022 and 2023, the interest rates on most consumer loans — including credit cards, auto loans and home equity lines of credit — quickly followed suit. Even though the central bank lowered its benchmark rate three times in 2024, those consumer rates are still elevated, and are mostly staying high, for now.
“Borrowing rates are high, with mortgage rates near 7%, many home equity lines of credit in double-digit interest rate territory, and the average credit card rate still above 20%,” McBride said. “But savers continue to be rewarded with inflation-beating returns on the top-yielding savings accounts, money market accounts, and certificates of deposit. Retirees, in particular, are earning good income on their hard-earned savings.”
Five ways the Fed affects your wallet
1. Credit cards
Many credit cards have a variable rate, so there’s a direct connection to the Fed’s benchmark.
With a rate cut likely postponed until at least September, the average credit card annual percentage rate is currently just over 20%, according to Bankrate — not far from last year’s all-time high. In 2024, banks raised credit card interest rates to record levels and some issuers said they are keeping those higher rates in place.
“Interest rates on credit cards are painful because they are so high,” said Charlie Wise, senior vice president and head of global research and consulting at TransUnion.
“The reality is you could drop the fed funds rate by two full basis points and all you are doing is lowering your interest rate from say 22% to 20%,” he said.
Borrowers are better off switching to a zero-interest balance transfer credit card, or consolidating and paying off high-interest credit cards with a lower-rate personal loan, experts say.
2. Auto loans
Auto loan rates are tied to several factors, but the Fed is one of the most significant.
With the Fed’s benchmark holding steady, the average rate on a five-year new car loan was 7.3% in May, near a record high, while the average auto loan rate for used cars was 11%, according to Edmunds.
But car prices are also rising — in part due to pressure from Trump’s tariffs on imported vehicles — leaving car buyers with bigger monthly payments and a growing affordability problem. Now, of those households with a monthly car payment, 20% pay more than $1,000 a month, according to separate data from Bank of America.
“Every way you slice it, car buyers are struggling to find a deal in today’s car market, and financing a new vehicle is becoming cost-prohibitive for more shoppers,” said Ivan Drury, Edmunds’ director of insights.
3. Mortgages
Mortgage rates don’t directly track the Fed, but are largely tied to Treasury yields and the economy. As a result, concerns over tariffs and ongoing uncertainty about future costs have kept those rates within the same narrow range for months.
The average rate for a 30-year, fixed-rate mortgage was 6.91% as of June 17, while the 15-year, fixed-rate was 6.17%, according to Mortgage News Daily.
“I don’t see any major changes coming in the immediate future, meaning that those shopping for a home this summer should expect rates to remain relatively high,” said Matt Schulz, chief credit analyst at LendingTree.
Adjustable-rate mortgages, or ARMs, and home equity lines of credit, or HELOCs, are pegged to the prime rate, and those rates are also higher.
4. Student loans
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Federal student loan rates are set once a year, based in part on the last 10-year Treasury note auction in May and fixed for the life of the loan, so most borrowers are somewhat shielded from Fed moves and recent economic turmoil.
Current interest rates on undergraduate federal student loans made through June 30 are at 6.53%. Starting July 1, the interest rates will be 6.39%.
Although borrowers with existing federal student debt balances won’t see their rates change, many are now facing other headwinds and fewer federal loan forgiveness options.
5. Savings
While the central bank has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate.
“Yields for CDs and high-yield savings accounts aren’t at the sky-high levels they were a year ago, but they’re still really strong,” said LendingTree’s Schulz. Top-yielding online savings accounts currently pay more than 4%, on average, according to Bankrate — well above the annual rate of inflation.
“Shopping around for high-yield savings accounts, if you haven’t done it already, is one of the best financial moves you can make to take advantage of rates being high,” Schulz said.
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