Federal Reserve holds interest rates steady. What that means for you

The Federal Reserve announced Wednesday it will leave interest rates unchanged as President Donald Trump‘s tariff policies weigh on economic growth.

Although inflation receded last month, an escalating trade war threatens to hike prices on consumer goods going forward.

“Tariffs on aluminum, steel and oil are essential elements to production across a wide range of products,” said Brett House, an economics professor at Columbia Business School. “Those price increases are going to ripple more widely across the American economy.”

National Economic Council director Kevin Hassett recently warned of “some uncertainty” in the weeks ahead because of the United States’ tariff agenda.

The inflation risk from tariffs ensured the central bank would take a more cautious approach, according to House. “Greater uncertainty in the world means the Fed is more predictably in a wait-and-see mode,” he said.

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The federal funds rate sets what banks charge each other for overnight lending, but also influences many of the borrowing and savings rates Americans see every day.

When the Fed hiked rates in 2022 and 2023, most consumer borrowing costs quickly followed suit. Even though the central bank began to lower its benchmark rate at the end of last year, consumer rates are still elevated, with credit card annual percentage rates down only slightly from an all-time high. 

“The pressure on household budgets is unrelenting,” said Greg McBride, chief financial analyst at Bankrate.com.

As the federal funds rate comes down, consumers may see their borrowing costs decrease as well, making it cheaper to borrow money to purchase a house or a car. 

But even with the Fed on the sidelines for now, consumers struggling under the weight of high prices and high borrowing costs could see some relief, experts say. Already, rates for mortgages, auto loans and credit cards are edging lower.

Most credit cards have a variable rate, so there’s a direct connection to the Fed’s benchmark.

Even though the central bank held rates steady at the last few meetings, average annual percentage rates have eased. The average credit card rate is down to 20.09%, from 20.27% at the start of the year, according to Bankrate. That is on the heels of the rate cuts that already went into effect. 

“Credit card rates have fallen from their 2024 record highs,” said Matt Schulz, chief credit analyst at LendingTree. “March was the sixth straight monthly decline, but the decreases have slowed as Fed rate cuts get further back in the rearview mirror.”

Because 15- and 30-year mortgage rates are fixed, and largely tied to Treasury yields and the economy, those rates have also been trending lower.

Uncertainty over tariffs and worries about a…