Despite increasing political pressure from President Donald Trump, the Federal Reserve is expected to keep interest rates steady at its policy meeting this week.
Amid a slightly weaker labor market, inflationary pressures and an uncertain geopolitical situation, futures market prices suggest next to no chance of a rate cut, according to CME Group’s FedWatch Indicator.
According to Matt Schulz, chief credit analyst at LendingTree, the Fed’s pause could disappoint Americans eager for lower debt repayments.
“Still, interest rates on various types of loans are at their lowest levels in years and will likely continue to fall, at least for a while,” Schulz said. “This is welcome news as families across the country continue to struggle with affordability.”
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Trump vs. Powell
If the Fed takes a pause as expected, Trump is likely to be the most vocal critic of the central bank’s decision.
The president stepped up his criticism of Fed Chairman Jerome Powell last week at the World Economic Forum in Davos, Switzerland, saying in a CNBC interview that he had narrowed the list of candidates to replace Powell “to maybe one.” He is widely expected to select someone inclined to cut interest rates more aggressively.
The president said in his remarks last week that inflation has been “defeated.” In previous comments about the Fed, he has also said that keeping interest rates too high makes it harder for businesses and consumers to borrow, putting the U.S. at an economic disadvantage compared to countries with lower interest rates.
US President Donald Trump gestures as he delivers a special speech during the annual meeting of the World Economic Forum (WEF) in Davos on January 21, 2026. The World Economic Forum will take place in Davos from January 19 to 23, 2026.
almond and | Afp | Getty Images
The Fed’s benchmark determines what banks charge each other for overnight loans, but it also has a trickle-down effect on many of the lending and savings rates Americans see every day.
Short-term interest rates are more closely tied to the federal funds rate, which is typically 3 percentage points above the federal funds rate. Longer-term interest rates are more dependent on inflation expectations and other economic factors.
Overall, the impact of the Fed’s actions varies significantly depending on the type of loan.
Mortgages
For example, fixed mortgage rates are not based directly on the Fed, but are typically based on long-term interest rates on government bonds.
The average interest rate on a 30-year fixed-rate mortgage was 6.19% as of Friday, according to Mortgage News Daily, down from more than 7% a year ago – helped in part by Trump’s push to let Fannie Mae and Freddie Mac buy $200 billion in mortgage bonds.
Just as Trump announced this plan, the average interest rate on the 30-year fixed-rate mortgage briefly fell below 6% earlier this month.
“Mortgage rates have fallen below 6% in recent weeks for the first time in years, only to rise again last week due to the geopolitical chaos surrounding Greenland,” said Melissa Cohn, regional vice president of William Raveis Mortgage. If tensions ease, interest rates could fall again, she said, but “rates are rising much faster than they are falling.”
Credit cards
In contrast, most credit cards have a variable interest rate, so there is a more direct connection to the Fed’s benchmark.
After three consecutive rate cuts in 2025, the average credit card interest rate in the U.S. fell to 23.79% in January, marking the lowest level since March 2023, according to LendingTree.
Still, “these interest rates will not drop to a level that eases the burden on those with balances,” said certified financial planner Stephen Kates, a financial analyst at Bankrate.
Currently, about 175 million people in the U.S. have credit cards, and while some pay off the balance each month, about 60% of credit card users have revolving debt, according to the Federal Reserve Bank of New York.
However, Trump is trying to get involved here too. Trump’s call for a temporary 10% cap on credit cards could result in significantly lower interest charges for those who carry balances from month to month. But executives from some of the largest U.S. banks, including JPMorgan Chase CEO Jamie Dimon said this type of policy would be “an economic disaster.”
Car loans
Trump recently said that car payments and other expenses are “going down.”
Although interest rates on new car loans have fallen slightly, car buyers are financing larger amounts, so the financing crisis has only worsened.
According to Edmunds, the average amount financed on a new car reached a record $43,759 late last year. The average monthly payment for a new car purchase is at a new high, as is the share of new car buyers with a car payment of $1,000 or more.
“The borrowing landscape remains quite unfriendly for car buyers as they still contend with sky-high prices and interest rates that have not changed significantly despite three rate cuts last year,” said Joseph Yoon, consumer insights analyst at Edmunds.
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