What's next for US interest rates?
Rates go unchanged amid economic uncertainty


The Federal Reserve once again opted to hold interest rates steady at its June meeting, marking the fourth consecutive time that it has done so. The central bank's overnight borrowing rate sits at a target range between 4.25% to 4.50%, where it has been since the final in a series of rate cuts last December, prior to President Donald Trump taking office.
This decision is in line with the Fed's prior plan to wait and see what impact Trump's economic policies may have. In addition to Trump's tariff agenda, the Fed is now also monitoring developing tensions in the Middle East.
What will the Fed do next?
Looking ahead, the Fed's "expectations of higher inflation and lower economic growth" have contributed to "continued uncertainty from Fed officials about the future of rates," said CNBC. In the Fed's dot plot, a chart recording each Federal Reserve member's predictions, "most officials stuck with earlier forecasts that the Fed will be able to cut borrowing costs by half a percentage point this year," with two rate cuts penciled in, said The New York Times. However, "nine of the 19 policymakers forecast the Fed doing less," with seven predicting no cuts at all.
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For now, however, Powell insisted that the central bank is "well-positioned to hold off on rate cuts" until it waits to see what happens because the economy is "still solid," said CBS News. Over the summer, "Powell said that he expects the Fed will learn a 'great deal more' on tariffs," which "will inform their thinking moving forward."
When is the next interest rate decision?
The Federal Reserve next meets July 29-30. Based on Powell's statements following the June meeting, "nothing" indicates that the Fed is "preparing to imminently lower interest rates," said the Times. Instead, it is likely it will continue to hold rates steady.
How do interest rates affect the economy?
The Fed uses interest rates to either stimulate or rein in economic activity. Generally, the theory is that "cutting rates decreases borrowing costs, prompting businesses to take out loans to hire more people and expand production," which "in turn, stimulates economic activity and growth," said Investopedia. "Conversely, when the economy is overheating, the Fed may raise rates to cool things down and prevent inflation from spiraling out of control."
What do rate changes mean for your wallet?
Beyond broader economic implications, the Federal Reserve's decisions also hold significance for your finances.
When rates are cut, that provides "some welcome relief for consumers who are in the market for a home or auto purchase, as well as for those carrying pricey credit card debt," said CBS News, by lowering interest rates on those products. On the other hand, rate cuts "could also have a downside of shaving the relatively high returns recently enjoyed by savers," said the outlet.
Meanwhile, when the Fed decides to raise rates, it usually has the inverse effect, in that it will typically lead interest rates on credit cards, auto loans and variable rate mortgages to go up. The good news with rate hikes, though, is that "savings accounts tend to earn more interest," said LendingTree.
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Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She previously served as a deputy editor and later a managing editor overseeing investing and savings content at LendingTree and as an editor at the financial startup SmartAsset, where she focused on retirement- and financial-adviser-related content. Before that, Becca was a staff writer at The Week, primarily contributing to Speed Reads.
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