The Fed Left Interest Rates Alone, but the Economy Is Still a Mess

Since the Fed cut rates three times in 2024, many of us hoped for cheaper borrowing costs.

But a lot has changed since last year.

US households arecurbing spendingamid fears of a looming recession.

Economists are concerned thattariffswill unleash more inflationary pressures.

Investors are cutting their losses in a plunging stock market.

Read more:Trump Can’t Lower Interest Rates.

But What Power Does the President Have Over the Fed?

Interest is the cost you pay to borrow money, whether that’s through a loan or credit card.

When the central bank “maestro” increases interest rates, many banks tend to follow.

When the Fed lowers rates, banks tend to drop their interest rates too.

That’s because the Fed’s official “mandate” is to balance price stability and maximum employment.

Any rapid decline in economic activity can cause a spike in joblessness, leading to a recession.

Central bankers also take a risk if they ease rates too quickly.

“So they’ll tread carefully, even if the public is feeling the squeeze.”

The economy shouldn’t be too hot or too cold.

Here’s what today’s decision to pause rate cuts means forcredit card APRs,mortgage ratesandsavings rates.

However, every issuer has different rules about changing APRs.

Even then, mortgage rates tend to rise quickly and fall slowly.

It could take until the end of the year for rates to get into the low-6% range."