Fed rates likely to remain unchanged: what this means

The Fed is expected to keep interest rates on hold at its policy meeting this week, despite increasing political pressure from President Donald Trump.

Amid a moderately soft labor market, inflationary pressures and an uncertain geopolitical climate, futures market pricing suggests there is little chance of a rate cut, according to CME Group FedWatch indicators.

Matt Schultz, chief credit analyst at LendingTree, said the Fed’s suspension could disappoint Americans who were hoping for relief from debt payments.

“Still, interest rates on some types of loans are at their lowest levels in years and are likely to continue falling, at least for a while,” Schulz said. “This is welcome news as affordability issues continue to plague families across the country.”

If the Fed stops as expected, Trump is likely to be the most vocal critic of the Fed’s decision.

Last week, the president stepped up his criticism of Federal Reserve Chairman Jerome Powell at the World Economic Forum in Davos, Switzerland, and said in an interview with CNBC that he had “narrowed down the list of candidates to replace Mr. Powell to probably one person.” He is widely expected to choose someone more willing to cut interest rates more aggressively.

The president said in remarks last week that inflation had been “defeated.” He also said in previous comments about the Fed that keeping the federal funds rate too high would make it harder for businesses and consumers to borrow, putting the U.S. at an economic disadvantage against countries with lower interest rates.

The Fed’s benchmarks set the amount banks charge each other for overnight loans, but they also have a trickle-down effect on many borrowing and savings rates that Americans see every day.

Short-term interest rates are tightly fixed by the prime rate, which is typically 3 percentage points higher than the federal funds rate. Long-term interest rates are largely determined by inflation expectations and other economic factors.

Overall, the impact of the Fed’s actions varies widely by loan type.

For example, fixed mortgage rates do not directly follow the Fed, but typically follow the lead of long-term Treasury rates.

The average interest rate on a 30-year fixed-rate mortgage was 6.19% as of Friday, down from more than 7% a year ago, thanks in part to President Trump’s push to have Fannie Mae and Freddie Mac buy $200 billion in mortgage bonds, according to Mortgage News Daily.

The average interest rate on a 30-year fixed-rate mortgage briefly fell below 6% earlier this month, just after President Trump announced his plan.

“Mortgage rates have fallen below 6% in recent weeks for the first time in years, but they rose again last week due to the geopolitical turmoil surrounding Greenland,” said Melissa Cohn, regional vice president at William Rabeis Mortgage. He said interest rates could ease again if tensions smolder, but “interest rates are going to go up a lot faster than they go down.”

In contrast, most credit cards have variable interest rates, so they have a more direct relationship to the Fed’s benchmark.

Following three consecutive interest rate cuts in 2025, the average U.S. credit card interest rate fell to 23.79% in January, the lowest level since March 2023, according to LendingTree.

Still, “interest rates are not going to fall to a level that will ease the burden on people carrying balances,” said Stephen Cates, a certified financial planner and financial analyst at Bankrate.

About 175 million people in the U.S. currently own a credit card, and while some pay off their balances every month, about 60% of credit card users have revolving debt, according to the New York Fed.

But President Trump is trying to get involved here too. President Trump’s call for a temporary 10% cap on credit cards could mean significantly lower interest costs for people carrying monthly balances. However, executives at major U.S. banks JP Morgan Chase CEO Jamie Dimon said this type of policy “would be an economic disaster.”

President Trump recently said that expenses such as car payments are “going down.”

Although interest rates on new car loans have fallen slightly, the affordability squeeze has worsened as car buyers borrow large sums of money.

The average loan amount for a new car reached an all-time high of $43,759 at the end of last year, Edmunds said. The average monthly payment for a new car is at an all-time high, as is the percentage of new car buyers who have a car payment of $1,000 or more.

“The borrowing environment remains very unfavorable for car buyers, who are still dealing with sky-high prices and interest rates that haven’t changed significantly despite three rate cuts in the last year,” said Joseph Yun, consumer insights analyst at Edmunds.

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