Borrowers hoping for more financial relief from the Federal Reserve may need to wait longer, as the central bank is expected to pause additional rate cuts at its January 29 meeting.
The Federal Reserve will maintain its benchmark rate between 4.25% and 4.5% per FactSet data which shows most experts expect no rate cuts before May.
After three consecutive rate reductions last year the Federal Reserve decided to refrain from further cuts at its upcoming January 29 meeting. Households gained initial cost relief through earlier rate cuts until fears about inflation and emerging economic concerns such as President Donald Trump's proposed tariffs combined with immigration policies resulting in the Fed taking a cautious stance.
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How Fed's interest rate pause affects borrowers
“Anyone hoping for the Fed to ride in as the cavalry and rescue you from high interest rates anytime soon is going to be really disappointed,” said Matt Schulz, chief credit analyst at LendingTree, told CBS News. That means consumers won’t see immediate relief on interest rates for credit cards, mortgages, auto loans, and other debt
{{/usCountry}}“Anyone hoping for the Fed to ride in as the cavalry and rescue you from high interest rates anytime soon is going to be really disappointed,” said Matt Schulz, chief credit analyst at LendingTree, told CBS News. That means consumers won’t see immediate relief on interest rates for credit cards, mortgages, auto loans, and other debt
{{/usCountry}}While borrowers may not see relief, savers can still benefit from relatively high interest rates on savings accounts. “Returns on high-yield savings accounts have fallen from their record levels as the Fed has moved to lower rates. However, as the Fed pauses, that decline should slow as well,” Schulz added.
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However, mortgage rates have remained stubbornly high, hovering around 7%. “The general consensus is that rates will likely remain unchanged until the market has more clarity around potential policy impacts as it relates to immigration, taxes, and tariffs,” Austin Walker, CEO of A. Walker & Co told CBS News.
If inflation ticks higher due to new tariffs and mass deportations shrinking the labor force, mortgage rates could stay elevated. Increased wage pressures and higher costs from tariffs would make borrowing more expensive, potentially hurting homebuyers and refinancers alike.
Will interest rates drop under Trump?
Trump has openly called for lower interest rates at the World Economic Forum: “I demand that interest rates drop immediately.” However, Fed Chairman Jerome Powell has made it clear that the central bank bases its decisions on economic data, not political pressure.
“If we see inflation pressures ease on a consistent basis, I could see the Fed cutting interest rates two or three times this year,”Greg McBride, chief financial analyst at Bankrate.com told CBS. However, he also warned that if inflation remains persistent, the Fed may not cut rates at all.