The Federal Reserve kept interest rates unchanged Wednesday, leaving millions of Americans stuck with high borrowing costs as policymakers weighed persistent inflation and the risk that higher energy prices from the conflict with Iran could keep price pressures elevated.
The move means consumers hoping for cheaper credit will have to keep waiting. It also comes despite repeated calls from President Donald Trump for lower interest rates. Economists say rising energy prices tied to the Iran conflict could keep inflation elevated and even prompt the Federal Reserve to consider another rate hike when officials meet again in September.
“It’s very difficult to read the chairman and know his view of the path forward,” said Eugenio Alemán, chief economist at Raymond James, referring to Fed Chairman Kevin Warsh.
If inflation remains stubborn and policymakers decide to raise rates later this year, consumers already squeezed by higher prices could face even greater financial pressure.
“Consumers will remain stressed going forward, and if they start increasing interest rates, conditions are going to deteriorate further,” Alemán said.
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For Americans, the biggest impact is likely to be felt every time they borrow money.
The Fed doesn’t directly set the rates consumers pay, but its benchmark federal funds rate influences the cost of credit throughout the economy. Banks use it as the foundation for overnight lending, and many consumer borrowing rates rise and fall alongside it. The benchmark also helps determine the prime rate, which is typically about three percentage points higher than the federal funds rate. Longer-term borrowing costs, including mortgages, are driven more by inflation expectations and broader market conditions.
Credit cards remain one of the clearest examples because most carry variable interest rates that move with Fed policy. With the central bank holding rates steady, the average interest rate on a new credit card offer has hovered near 24% for months, according to LendingTree.
“Anyone expecting the Fed to ride to the rescue and lower rates is almost certainly going to be disappointed,” said Matt Schulz, LendingTree’s chief consumer finance analyst.
Auto loans also remain expensive.
Although auto loan rates are fixed once a loan is issued, they have stayed elevated in part because of the Fed’s benchmark rate. According to Edmunds, the average interest rate on a six-year loan for a new vehicle is 7%, while the average rate for a used vehicle is 10.5%.
“With another rate hold … relief isn’t on the horizon,” said Jessica Caldwell, head of insights at Edmunds.
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