The Federal Reserve kept interest rates steady at the conclusion of its policy meeting on Wednesday.
In what could be Jerome Powell’s final term as chairman before President Donald Trump’s yet-to-be-confirmed nominee Kevin Warsh takes the helm, central bankers kept interest rates in a target range of 3.5% to 3.75%.
According to Sean Snaith, director of the Institute for Economic Forecasting at the University of Central Florida, inflation has risen sharply since the war with Iran began, leaving policymakers with limited room for maneuver. “We are in a kind of limbo — between Iran and the Fed transition,” Snaith said.
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Before the oil shock, inflation was above the Fed’s 2% target but not worsening. Now the rise in energy costs could have longer-term inflationary effects, economists say.
For Americans grappling with higher gas prices and broader affordability challenges, the central bank’s decision to keep interest rates unchanged does little to ease fiscal pressures. “The cavalry won’t come anytime soon,” Snaith said.
How the Fed’s Decision Affects You
The Fed’s benchmark determines what fees banks charge each other for overnight loans, but it also has a trickle-down effect on many consumers’ borrowing and savings rates.
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, for example on home loans, are more influenced by inflation and other economic factors.
Credit cards
Most credit cards have a short-term interest rate and are therefore based on the Fed’s benchmark.
After the Fed cut rates three times in the second half of 2025, the average annual interest rate remained just under 20%, according to Bankrate.
“Without the Fed’s rate cuts, there isn’t much reason to expect significant declines any time soon, so it will continue to be very expensive to carry a balance,” said Matt Schulz, chief credit analyst at LendingTree.
Mortgage interest rates
Fixed mortgage rates, on the other hand, are not based directly on the Fed, but are typically based on long-term interest rates on government bonds.
Concerns about how the Iran war will affect the U.S. economy have already pushed the average interest rate on a 30-year fixed-rate mortgage to 6.38% as of Tuesday, from 5.99% at the end of February, according to Mortgage News Daily.
That’s leaving homeowners with current low mortgage rates “feeling like they’re stuck,” said Michele Raneri, vice president and head of U.S. research and advisory at TransUnion. “Mortgages impact churn more than any other type of credit,” she said, noting how a drop in interest rates can boost borrowing activity.
Student loans
Federal student loan interest rates are also fixed and based in part on the 10-year Treasury note, so most borrowers have some protection from the Fed’s actions and recent economic uncertainty.
According to the U.S. Department of Education, current interest rates for federal student loans issued through June 30 are 6.39%. Interest rates for the coming school year are based in part on the May auction of the 10-year bond.
Car loans
Auto loan interest rates depend on several factors, including the Fed’s benchmark. 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.
Still, the average monthly payment on a new car rose to $773 in the first quarter of 2026, an all-time high as the interest rate on a five-year new car loan is nearly 7%.
“Car buyers are in a tough spot right now because they are under pressure from both sides: high sticker prices and high interest rates, and neither shows any signs of letting up,” said Joseph Yoon, consumer insights analyst at Edmunds.
“Until the interest rate picture changes, buyers will continue to stretch loan terms to make payments work, which will only increase the total cost of ownership down the road,” Yoon said.
savings interest
While the Fed does not have a direct influence on deposit rates, returns tend to correlate with changes in the target interest rate on federal funds. Although interest rates on certificates of deposit and high-yield savings accounts are down from recent highs, they are still above the annual rate of inflation.
According to Bankrate, highest-yield online savings accounts and one-year CDs currently pay interest rates of about 4%.
“Yields on high-yield savings accounts and certificates of deposit are below their peaks a few years ago, but are still high compared to what we have seen for most of the last decade,” Schulz said.
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