If you have tried to finance a car, remove home loans or pay credit card loan, you probably saw that the cost of borrowing is still expensive. After the Federal Reserve cut the interest rates three times last year, many of us expected cheap credit in 2025.
But interest rates are never likely to be shaken soon.
The US Central Bank gets eight times a year to assess the health of the economy and determine monetary policy, mainly through federal funds changes, benchmark interest rates use to lend or borrow money overnight. In its next 6-7 meeting, Fed required To leave borrowing rates for the third consecutive time.
Fed Chair Zerome Powell remains stable under the supervision of labor market status and inflation pressure before any deduction. Despite the pressure at low rates from the White House, there is a lot of uncertainty on the impact of the economic agenda of the Trump administration, such as tariffs and government slashing.
Meanwhile, the American families are curbing the expenses amid the possibility of recession. Economists are worried that tariffs will highlight the pressure of more inflation. Investors are cutting their losses in a sinking stock market. There is widespread concern about employment, taxes, prices, social programs and everything that affects our financial livelihood.
Even if the Fed keeps the interest rates stable next week, its tone and message have great impact on the markets. Any matter of risk or uncertainty can take away investors and cause chain reaction in the economy.
What is affecting Fed’s decision?
Financial experts and those who monitor the market spend time in making a time to increase interest rates based on official economic data or focus special focus on inflation and job market. This is because the official “mandate” of the fed is to balance the value stability and maximum employment.
“Fed’s monetary policy will depend on which side of their mandate, inflation or employment, the most from the target,” Matthew martinSenior American economist with Oxford Economics.
Some economists hope that the fed will remain on the edge by the end of this year, while others expect this heat cut.
Generally, when inflation is high and the economy is in overdrive, as it was in early 2022, the fed increases its benchmark interest rate to borrow and reduce the supply of money. When unemployment is high and the economy is weak, the fed reduces its benchmark rate, reducing financial pressure on consumers to banks and it is less expensive to buy large-cost items through financing and credit.
You can hear the phrase “soft landing”, which refers to the Balancing Act of the Fed. According to market runners, the economy should not be very hot or too cold – it is just considered correct, such as porridge in goldlox.
Is there no risk of recession?
There are many warning indications of an economic recession – a weakness in GDP, decline in consumer confidence, increase in trimming. Even if a technical recession is not yet called, there are expectations for sharp recession in economic activity in the coming months.
There is a large wildcard tariff for the economy. Tariffs increase the cost of goods for domestic importers, then stator prices are then given to consumers.
American economist Gissela Young at Citigroup said, “Tariffs create a complex situation for the fed as they reverse the risk for inflation – but the growth and negative risk for the labor market,” said American economist Gissela Young in Citigroup.
If inflation increases, the fed will keep the interest rates longer. But if high tariffs, jointly, causes a serious contract to be severely contracted, with downsizing and cost-cutting, the fed may reduce low rates to encourage growth.
There is a risk.
“If the officers work very late, they risk becoming ‘behind the curve’ and (reason) is an even more severe recession,” Martin said. “If they greatly lower interest rates, however, they can put high and viscous inflation with weak economic growth – known as stagflation – which will be the worst in both world.”
How do interest rate changes affect you?
Fed’s decisions about interest rates affect how much we earn from our savings accounts, how much we pay to carry a loan and can we bear monthly mortgage payment.
Imagine a situation where financial institutions and banks form an orchestra and have a fed conductor, which directs markets and controls the supply of money. Although the Fed does not control the percentage given directly on its credit card and hostage, its policies have a domino effect on everyday consumer.
Interest is the cost you pay to borrow money, whether it is through loan or credit card. Many banks follow when the central bank increases the “mastro” interest rates. It can create a loan that we can take more expensive (22% vs. 17% credit card APR), but it can also be high savings yield (5% vs. 2% AP).
When the fed reduces rates, banks also drop their interest rates. The cost of borrowing cheap borrowings encourages investment and makes loan repayment slightly cumbersome, but we will not get high yield on our savings.
Experts still estimate the ability to cut a two -rate cut in 2025, although the market monitor and economists usually have different opinions about the monetary decisions of the Fed. The speed of interest rate reduction will depend on job markets, inflation pressure and other political and financial development.
Credit cards here mean next week’s fed decisions for APRS, mortgage rates and savings rates.
🏦 Credit Card APRS
By keeping the Federal Funds rate stable, those who issue credit cards can lead to maintaining an annual percentage rate on your dues every month. Some credit card APRS fell slightly down after the Fed rate cut last year, but they are still really high. However, each issuer has different rules about changing APRS. To avoid accumulating high-onion loans, try to pay your remaining amount complete or at least more than minimal payment.
– Tiffany Consors, CNET Money Editor
🏦 mortgage rates
Fed’s decisions affect overall lending costs and financial conditions, which in turn affect the housing market and home loan rates, although it is not a single relationship. Even when the fed keeps the interest rates stable, the mortgage rate may fluctuate in response to the new economic data, which affects the bond market and long-term treasury yields. This will take a significant economic recession, an increased decline in treasury yield and a range of rate cuts for hostage rates to a large extent.
– Catherine Wat, Cnet Money Housing Reporter
🏦 savings rates
The savings rate is variable and moves forward in lockstap with a federal fund rate, so your annual percentage yield may decrease after a higher rate cut at the end of this year. Although each bank determines different rates, we cannot see a significant decline in rates for high-upper savings accounts or deposits of deposits, for the least time. This gives the saver more time to maximize its earnings by locking at high CD rates or taking advantage of high savings rates, while they are still around.
– Kelly Ernst, CNET Money Editor
