The Federal Reserve will probably keep interest rates stable at the end of its two -day meeting next week, although President Donald Trump's comments on Thursday that he will “demand that interest rates will fall immediately”.
So far, the central bank has slowly moved to the re -calibration of politics after hiking its most important benchmark 5.25 percentage points between 2022 and 2023 to combat inflation, which is still above the 2% mandate of the Fed. In the election campaign lane, Trump said that inflation and high interest rates “destroy our country”.
For consumers who have to fight under the weight of the high prices and high credit costs, there is little relief in sight for the time being.
“Anyone who hopes that the FED will save the Fed as a cavalry and rescue of high interest rates will really be disappointed at any time,” said Matt Schulz, Chief Credit Analyst from LendingTree.
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The Federal Fundor sentence, which the US central bank defines, is the interest rate to which banks dress and borrow each other overnight. Although this is not the interest rate, paying the consumer, the movements of the Fed still affect the credit and savings quotas that consumers see every day.
As soon as the Fed Fund interest rate has dropped, consumers can lend their credit costs in various loans such as mortgages, car loans and credit cards, which makes it cheaper to borrow money.
Here is a breakdown about how it works:
Credit cards
Since most credit cards have a variable price, there is a direct connection to the Benchmark of the Fed. Although the central bank reduced its benchmark interest rate by a full percentage point last year, credit card costs remained increased.
Card exhibitors are often slower to react to the FED rate than to increases, said Greg McBride, boss Financial Analyst of bank rate.
According to the bank rate, the average credit card rate is currently more than 20%in the proximity of an all-time high.
In the meantime, the delinquencies are higher and, according to a report by the Federal Reserve in Philadelphia, the proportion of credit card holders recently only increased minimum payments for their invoices to a 12-year high of the bills.
“This means that it may be more important than ever to control such high debts,” said Schulz.
Mortgage interest
The mortgage interest rates have increased in the past few months, even if the Fed interest rates are reduced.
Since the mortgage interests of 15 and 30 years are defined and are mainly bound to the income from the treasury and the economy, they do not fall into the move with FED policy. Since most people have fixed -interest mortgages, their rate does not change if they refinance or sell their current house and buy another property.
“Most mortgage debts are set so that existing homeowners are not affected,” said McBride from bank rate. “It only contributes to potential buyers and keeps the sale of homes on hold.”
According to the bank rate, the average interest rate for a 30-year-old fixed mortgage is now 7.06%.
Car loan
Car loan interest is determined. However, these debts are one of the fastest growing sources for consumer loans outside of mortgage loans. The payments grew because the prices for automotive prices rise and outstanding car loan credit promotes to more than 1.64 trillion dollars.
According to the bank rate, the average interest rate for a five-year new car loan is now 7.47%.
“With the Fed signaling that the reduction in installments will be gradually, the affordability problems for most new vehicle buyers are likely to exist,” said Joseph Yoon, analyst by Edmund's' consumer insights.
“Although further interest cuts could deliver a certain relief in 2025, it makes it difficult for the continued upward trend of new vehicle prices to anticipate significant improvements in the affordability of consumers in the new year,” said Yoon.
Student loan
The federal loan interest is also determined, so that most borrowers from FED parades are not immediately affected.
Students who have taken up direct federal loans for the academic year 2024-25 direct student loans for federal studies 2024 to 2023-24. The interest rates for the upcoming school year are partly based on the auction of 10-year-old Treasury Note.
Private student loans usually have a variable interest rate that is bound to Prime, Treasury Bill or another interest index, which means that these borrower usually pays more interest. How much more varies with the benchmark.
Savings quotas
While the central bank has no direct influence on the deposit interest, the returns tend to be correlated with changes to the interest rate of the target fund.
As a result of the interest rate increase of the FED in recent years, the top yield online savings accounts have offered the best returns for more than a decade and, according to McBride, still pay almost 5%.
“The good thing that the Fed is on the side is that savers can enjoy these prepared income for some time,” said McBride.
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