A shopper carries a Hollister bag at a shopping center in Dayton, Ohio, Oct. 21, 2025.
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The Federal Reserve is on the verge of “regime change” after the Justice Department dropped its criminal investigation into Fed Chairman Jerome Powell, removing a potential obstacle to the confirmation of President Donald Trump’s nominee, Kevin Warsh, as his successor.
Central bankers are expected to keep interest rates steady at their policy meeting next week – likely Powell’s final term as chairman – and do little to ease consumers’ current affordability concerns.
Amid an inflation shock, a war with Iran and an uncertain labor market, futures market pricing suggests virtually no chance of a rate cut, according to CME Group’s FedWatch Indicator.
Brent crude has risen more than 55% since the Iran war began in late February, causing gasoline and jet fuel prices to jump. Many employers are putting their hiring plans on hold and consumer confidence is at an all-time low.
“Even if the gas spikes disappeared, prices would still be higher,” said certified financial planner Stephen Kates, a financial analyst at Bankrate. “Even if we go back to where we were before the Iran conflict, there is a lot of evidence that this is not the right time to cut rates again.”
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The Fed’s benchmark determines what banks charge each other for overnight loans, but it also has a ripple effect on many of the borrowing and savings rates Americans face every day.
Short-term interest rates are 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.
“Americans are struggling with trillions of dollars in credit card, auto and student loan debt, and higher interest rates are making this even more difficult,” said Rohit Chopra, former director of the Consumer Financial Protection Bureau.
How the Fed Affects Your Finances
The impact of the Fed’s actions varies significantly depending on the type of loan.
For example, the interest rates for 15- and 30-year fixed-rate mortgages are not directly based on the Fed’s developments, but are typically based on long-term interest rates on government bonds. As a result, mortgage rates remain volatile amid mixed signals from Trump on the war with Iran.
Auto loan interest rates depend on several factors, including the Fed’s benchmark. But as financing costs remain high, new car buyers are taking out longer loans to keep their monthly payments manageable, according to the latest data from Edmunds.
Federal student loan interest rates are based in part on the last 10-year Treasury bond auction in May. They are fixed for the life of the loan, so most borrowers have some protection from Fed actions and recent economic uncertainty.
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In contrast, most credit cards have a variable interest rate, so there is a more direct connection to the Fed’s federal funds rate. Since the Fed interest rate is expected to remain at current levels, it is unlikely that the interest rate on credit card debt will decrease any time soon.
Savings rates also tend to correlate with changes in the target interest rate for federal funds. Therefore, maintaining this rate has kept savings returns above the inflation rate, a rare win for savers.
A changing of the guard
Although central bankers have indicated that their goal of stabilizing prices and maximizing employment is why they want to keep interest rates stable for now, interest rate decisions could change under new leadership.
On Tuesday, the Senate Banking Committee held a hearing to consider Trump’s nomination of Warsh as the next Fed chair.
If confirmed, Warsh, a former Fed governor with a Wall Street background, will take over when Powell’s term ends next month.
Warsh said under his leadership the central bank would remain independent despite the president’s efforts to cut interest rates more aggressively.
Trump has been a vocal critic of Powell and the central bank’s decision to keep the benchmark in its current range. The president has argued that keeping the federal funds rate too high makes it harder for businesses and consumers to borrow and puts the U.S. at an economic disadvantage compared to countries with lower interest rates.
“We should have the lowest interest rate in the world,” Trump said on CNBC’s “Squawk Box” on Tuesday.
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