Amid the geopolitical turmoil, the Federal Reserve kept interest rates steady at the conclusion of its monetary policy meeting on Wednesday.
An energy shock and higher inflation expectations due to the Iran war ruled out any possibility of a rate cut, analysts said.
Since December, the federal funds rate has remained stable within a target range of 3.5% to 3.75%. 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.
For Americans struggling amid rising gas prices and broader affordability challenges, the central bank’s decision does little to ease fiscal pressures.
“Higher fuel costs, as well as the downstream impact on shipping, travel and trade, are likely to further increase pressure on consumer prices,” said certified financial planner Stephen Kates, a financial analyst at Bankrate. “A rate cut when inflation is rising would be difficult to justify, even if it received political support.”
Powell under pressure
President Donald Trump called on Fed Chairman Jerome Powell to cut the central bank’s key interest rate, arguing that inflation has been “defeated.”
“Where is Federal Reserve Chair Jerome ‘Too Late’ Powell today? He should cut interest rates IMMEDIATELY, not wait for the next meeting,” Trump wrote in a March 12 Truth Social post. Powell only has one more session before his term at the helm ends.
Before the oil shock, inflation was above the Fed’s 2% target but not worsening. Now the rise in energy costs could have a longer-term impact on inflation, experts say.
“As tensions over the Iran conflict ease, inflationary pressures will gradually ease. By then, the economy may have to endure a period of higher inflation again,” Kates said.
How the Fed’s Decision Affects Your Finances
The U.S.-Israeli attack on Iran helped push the benchmark 10-year Treasury yield to 4.208%. The 10-year bond yield is a barometer for mortgage rates and other longer-term loans.
Short-term interest rates are more closely tied to the federal funds rate, which is typically 3 percentage points above the federal funds rate.
Credit cards
Most credit cards have a short-term, variable interest rate and are therefore closely tied to the Fed’s benchmark.
According to Bankrate, the average APR has been close to 20% since November.
“Credit card rates tend not to move much unless enforced by the Fed, so I expect we will see a few months of relative stability,” said Matt Schulz, chief credit analyst at LendingTree.
Mortgage interest rates
Fixed mortgage rates are not directly based on the Fed: They are largely tied to Treasury yields and the U.S. economy.
Fears that the widening war in the Middle East could increase inflationary pressures have already caused the average interest rate on a 30-year fixed-rate mortgage to rise to 6.29% on Tuesday, from 5.99% at the end of February, according to Mortgage News Daily.
“Given the global uncertainty, the uncertain economic outlook and the Fed’s likely continued pause on rate cuts, I expect mortgage rates to remain relatively volatile,” Schulz said.
Student debt
Federal student loan interest rates are also fixed and based in part on the 10-year Treasury note. According to the U.S. Department of Education, current interest rates for federal student loans issued through June 30 are 6.39%.
Car loans
According to the Consumer Financial Protection Bureau, auto loan debt is another problem for over 100 million Americans, due in part to inflated pricing and high financing costs.
According to Edmunds, the average amount financed on a new car reached an all-time high of $43,759 late last year. The average monthly payment for a new car purchase is at a record high, as is the share of new car buyers with a car payment of $1,000 or more.
“Car buyers continue to battle soaring car prices by extending their loan terms to achieve more comfortable monthly payments. Unfortunately, these longer terms come with higher interest rates, keeping average rates high,” said Joseph Yoon, Consumer Insights Analyst at Edmunds. This month, higher gas prices only add to affordability concerns.
A potential bright spot for car buyers: Eligible taxpayers will be able to deduct up to $10,000 in car loan interest this tax season under a temporary provision enacted as part of President Donald Trump’s One Big Beautiful Bill Act, signed in July.
savings interest
There is another ray of hope for savers on the Fed decision.
While the Fed does not have a direct influence on deposit rates, returns tend to correlate with changes in the target federal funds rate. Although interest rates on certificates of deposit and high-yield savings accounts have fallen from recent highs, they are still above the annual rate of inflation.
As long as the central bank remains aloof, “the interest rate break is good news for savers,” said Schulz.
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