The Fed holds rates firm—here's what it means for your money

Borrowing costs aren't coming down anytime soon.

The Federal Reserve held interest rates steady on Wednesday, keeping its benchmark rate — known as the federal funds rate — at 4.25% to 4.5%, as was widely anticipated. This rate is what lenders use to set interest rates on credit cards, loans and auto financing.

Rate cuts are still expected in 2025, with the median rate predicted to fall to 3.9% by the end of the year. The 2026 outlook projects a benchmark rate of 3.4%.

So, what does this mean for you? The headline is that with rates staying high, borrowing will remain pricey. Credit card balances won't get much relief, since APRs are still near recent highs. Personal loans, home equity lines of credit (HELOCs) and auto loans will also stay relatively expensive.

Mortgage rates are less directly tied to the Fed and move more in response to the 10-year Treasury yield. Even so, they aren't expected to drop by much this year, according to data from Fannie Mae.

One silver lining to higher Fed rates is that banks pay more interest on savings, especially high-yield accounts and certificates of deposit.

The central bank's last rate cut was in December, lowering interest rates by 25 basis points — enough to shave a few dollars off monthly credit card, loan and auto financing payments for many borrowers.

The Fed is in a tricky spot. To combat inflation, it has kept borrowing costs high for nearly two years in the hopes of slowing spending and

investments, which in turn helps bring prices down. But with early signs of a slowing economy, pressure to cut rates is building.

The question is whether signs of an economic slowdown are enough to justify cuts. Year-over-year inflation has hovered around 3% for the past nine months — well above the Fed's 2% target. At the same time, tariffs add to the uncertainty. Since they are widely seen as inflationary, the Fed may be forced to keep rates higher if prices start to creep back up.

In other words, cutting rates too soon could allow inflation to increase, while waiting too long could end up slowing the economy unnecessarily.

With Wednesday's announcement, the likelihood of a 50 basis point cut by December 2025 is now 34%, according to the CME FedWatch Tool, a real-time tracker that measures rate hike probabilities. Markets place the odds of a 75-basis-point cut at 26.6%.

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