Federal preparation system Paused interest rate reduction At today’s meeting. This is enough Not so The most interesting decision of 2025 so far.
Nevertheless, considering that the Fed has reduced the interest rate three times in 2024, we wanted a way to decline borrowing costs. Last week, President Donald Trump said he would do so Requires interest rates immediately.
The Fed is currently in the maintenance pattern. There are too many uncertainty about immigration policies, especially immigrants and trade policies, to cause major changes in policies.
The Fed is expected to stabilize the interest rate for a while, but it may change anything in the next few months. Future decisions on interest rates affect the financials, such as how much money you earn from your savings account, how much extra charge to carry your credit card debt, and whether you can afford to take a car loan or mortgage loan.
This is a quick introductory book on interest rates and what the Fed’s decision today means for your money.
read more: Trump cannot lower interest rates. But what power does the president have against the Fed?
How Fed determines interest rates
The Fed is mainly used by the US bank to rental or borrowed by US banks overnight to evaluate economic health and set monetary policies, mainly by changing the federal funding rate. It is an interest rate.
Imagine a financial institution and a bank composing orchestras, the Fed is conductor, leading the market, and managing money supply. Therefore, the Fed does not directly set the ratio of a credit card and a mortgage loan, but the policy has a ripple effect on everyday consumers.
Interest is the cost of paying money, even if you use a loan or credit card. Many banks tend to continue when the central bank “Maestro” increases interest rates. This can make the debt we carry more expensive (22 % credit card APR, 17 % APR, etc.) may lead to higher savings (5 % APY pair). 2 % apy).
When the Fed lower interest rates, banks tend to lower interest rates, as they went three times last year. Our debt can be somewhat troublesome (although not so much), but the yield of savings is not so high.
How inflation and employment market affect the Fed
Financial experts and market watchers are spending a lot of time focusing on inflation and labor markets, especially in the direction of the economy, to reduce interest rates and hiking timing.
Economists are concerned that the Trump administration is implementing policies to relapse inflation. Fed is unlikely to reduce interest rates until the latter half of this year, as economic activities are growing and inflation has continued to rise.
In general, if the inflation is high and the economy is overdrive, the Fed sets higher interest rates and try to pump brakes by reducing money supply. Between March 2022 and July 2023, the Fed has helped to slow down the federal fund rate 11 times to slow record prices.
However, Fed is risky if you defeat too much inflation. The significant rapid decrease in economic activity can lead to a significant increase in unemployment and lead to recession. You may hear the phrase “soft landing”. This refers to the balance of suppressing inflation and lowering the unemployment rate.
The economy cannot be too hot or too cold. Like the RIDGE of Goldilocks, it must be right.
read more: This week’s Fed decision means the mortgage rate.
What does Fed’s decision today mean for your money?
For the past few years, high interest rates have made credit and loans more expensive. Last year’s interest rate reduction did not quickly improve our financial situation, but this year’s government monetary policy will definitely affect your money in the long term.
The following is what the credit card APR, mortgage rate, and savings rate mean today.
🏦 Credit card APRS
Stabilizing the federal fund rate can make credit card issuers claim the same annual ratio every month. However, all publishers have different rules for APR changes.
“Some credit card APRs were slightly inched after the Fed interest rate reduction last year, but they are still really expensive. If you have a lower interest rate, you may be able to repay your debt faster.-Tiffany Connor’s, CNET Money Editor
HORT Mortgage Rain Fee
The Fed’s decision affects overall borrowing costs and financial conditions, which affects the housing market and mortgage rates, which is not one -on -one.
“Despite the stabilization of interest rates, the mortgage ratio continues to fluctuate according to new economic data and political presentations. Inflation to reduce interest rates and decrease mortgage rates. Mortgages tend to rise rapidly and fall slowly. -Cathered Watt, CNET Money Housing Reporter
Saving savings
The savings rate fluctuates, and the federal funding rate will move in a rock step, so the annual yields may decrease in the latter half of this year, following a higher interest rate reduction. Remember that not all banks are created equally. It also regularly tracks the highest profit savings account and deposit certificate on CNET.
“The pause of the rate means that there is no significant change in the APY of the CD and savings account for at least for the time being. Savings while they are still around.” -Kelly Erunst, CNET Money Editor
What is next to interest rates?
Experts predict the possibility of two interest rates in 2025, but Market Watchers and Economists usually have various opinions on Fed’s financial decisions. The pace of interest rate reductions depends on the employment market, inflation pressure, and other political and financial developments.
