The Federal Reserve keeps interest rates stable at 4.25% to 4.5%
The Federal Reserve again kept its benchmark interest rate stable on Wednesday, leaving the federal funds rate locked in the same target range of 4.25% to 4.5% where it has been since December.
No surprises there, the markets have already priced it in. But anyone expecting a cut, including Donald Trump, will not get one anytime soon.
Trump, who has repeatedly pushed the Federal Reserve to lower rates, will now have to wait for the next meeting of the Federal Open Market Committee in September for any potential change. "They should have cut by then," he has said more than once. But the central bank is not biting.
Powell holds off on rate cuts as the impact of tariffs looms.
Jerome Powell directly pointed to the risk of Trump's tariffs as a key reason the Fed remains cautious. Inflation remains sticky. And economists say the worst of the price pressure caused by these tariffs is not even being felt yet. This means inflation could still rise before the end of the year.
"Uncertainty and inflation risks are still too high," Powell told reporters, essentially saying that the Fed is not taking risks. Some economists agree. They believe inflation could rise in the second half of 2025 once the full cost of tariffs begins to be felt in supply chains.
The federal funds rate, for anyone keeping score, is the overnight rate that banks charge each other to borrow. It sounds boring, but it matters. This rate trickles down to credit cards, loans, mortgages, and even your savings account. So when the Federal Reserve does nothing, millions of people feel it.
Credit cards are the first place this hurts. Since most cards have variable rates, they move with the Fed's actions, or in this case, inaction. Right now, the average APR on credit cards is just above 20%, according to Bankrate. That’s not far from last year's peak.
Mortgage rates are not directly tied to the Federal Reserve, but they do not ignore it either. They follow Treasury yield trends and broader market trends. With all the noise around tariffs and economic uncertainty, mortgage rates haven’t moved much.
As of July 28, the average rate for a 30-year fixed mortgage was 6.81%, and for a 15-year mortgage, it was 6.06%, according to data from Mortgage News Daily. If you’re considering an ARM or a HELOC, those track the prime rate, and they remain high as well.
Buyers have no relief. "As long as mortgage interest rates don’t start to decline significantly, growth in the mortgage market should remain modest," said Michele Raneri, VP at TransUnion. Prices are high, rates are high, and this combination excludes many people from the housing market.
Auto loans? Same story. The average rate for a new five-year auto loan is now 7.3%, and it climbs to 10.9% for used cars, according to Edmunds. And if you’re wondering why cars are so expensive, tariffs on imported vehicles and parts are part of it.
Even if the Federal Reserve cut rates tomorrow, these deep affordability issues would not go away. "It won’t immediately change the deeply entrenched affordability challenges in the market," Yoon added.
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