How does the Fed Rate Decisions affect your finances?

[bjl584]

Fed rate decision: How it affects your bank accounts, loans, credit cards, and investments

Yahoo Personal Finance · ASSOCIATED PRESS

Hal Bundrick, CFP® · Senior Writer, Mortgages
Updated Wed, June 18, 2025 at 2:00 PM EDT 4 min read


Federal Reserve Chairman Jerome Powell has been under pressure to lower interest rates from President Trump — who is threatening to replace Powell if he doesn't.

Well, Powell didn't cut rates on June 18 and doesn't seem too worried about his job security.

Who wants that job? The Fed hasn't cut short-term interest rates this year, and there are plenty of critics on both sides of the issue. The low end of the target federal funds rate has been at 4.25% since before Christmas. And there it remains.

Here's how the extended interest rate pause is impacting deposits, credit, and debt. How the interest rate pause affects checking and savings accounts

The microscopic interest you earn on your deposit accounts remains nearly unseen by the naked eye. Checking accounts

Many checking accounts pay just pennies of interest on the dollar. The cash is moving in and out of your account as you earn an income and pay bills. It's the convenience of liquidity that limits your earning power.

The national average of interest paid on checking accounts remains at 0.07%. That barely classifies as a fraction. Savings accounts

Interest rates on savings accounts have actually fallen.. The latest average is down to 0.38%. But this is not where savvy savers keep serious money.

High-yield savings accounts have been resilient money havens. They're still in the 4% range, with some financial providers slightly above or below that.

This is one category where shopping really pays off.

Dig deeper: 10 best high-yield savings accounts Money market accounts

If you have $10,000 or more that you want to keep on the sidelines but nearby, money market accounts have been convenient — but low-paying. National average payouts have trickled downward here too, now at 0.59%.

A better option might be a high-yield money market account, where rates are still near or a little better than 4%.

Read more: 10 best high-yield money market accounts What an on-hold Fed interest rate policy does to CDs

CD rates have been slowly sinking. A 12-month CD is averaging 1.62%, but you can find better deals if you're willing to take the time to hunt them down — and park your money in a bank that may not be in your city.

Your minimum deposit and term will affect your rate.

Learn more: These are the best CD rates on the market today. What the latest Federal Reserve rate pause will mean for mortgages and personal loans

Home mortgages

Mortgage rates. Who wants to talk about 'em? The only popular conversation begins with "when will mortgage rates go back down to 3%?"

Home loan rates are still lingering in the upper-6% range.

The Fed's manipulation of overnight interest rates charged to banks doesn't directly steer mortgage rates. Those are more influenced by the bond market, particularly the 10-year Treasury note. The bond market reacts to forecasts for economic growth — or the lack of it.

Bad economic news, such as a resurgence of inflation or a recession, can move rates down. But who is hoping for that?

Housing industry analysts with the Mortgage Bankers Association, Redfin, Realtor.com, and Zillow expect mortgage rates to remain in the 6% to 7% range through the end of this year.

Dig deeper: When will mortgage rates go down? Personal loans

Personal loan interest rates have been hovering in the 12% range for well more than a year. They were around 9.5% for three years, from 2020 to 2022. Like mortgage rates, it will take time for them to get close to that again. What happens to credit cards when the Fed holds interest rates

Credit card interest impacts everyone — except those who pay off their balance each month.

Of course, that's a good thing to aim for, but in the meantime, c'mon, Fed, give us a break. Credit card rates have spiraled from around 15% in 2021 to over 21% in 2025.

Credit card companies are clinging to the high interest that consumers are apparently still willing to pay. There's been no movement downward, even with last year's Fed rate cuts.

Yahoo Finance tip: The best way to earn a lower credit card interest rate right away is to ask. If you make regular payments and have seen your credit score improving, it's a good time to call your credit card provider and ask for a lower interest rate. How the Fed's interest rate policy impacts your investments

Stock prices often react to the Fed’s rate actions, but they are only one factor among many affecting the investing climate and stock prices.

If you intend to manage your investments to suit the current environment, keep watch on broader economic and corporate profit trends alongside interest rates. If you prefer to stay conservative, fill your portfolio with high-quality stocks that have proven themselves in all economic cycles.

Then, wait patiently for long-term growth.

[ua_guy]

He's going to need to cut rates at some point, but not for the reasons people would hope. Q2 numbers are forthcoming and I'm guessing they will show more retraction.

[Fishindude77]

The feds typically make very small adjustments in interest rates when they do make them.
In response to the thread title .... I see no need for anyone to adjust their personal long term financial strategy just because the rates happen to go up or down a fraction of a percent.

[disneysteve]

The prevailing interest rates on savings vehicles definitely impacts our finances. Over the past couple of years when rates were over 5%, I was loading up on CDs and Treasuries, locking in those rates as much as I could. Now rates have come down and will likely drop more so as holdings mature, I'm not able to reinvest those funds at similar rates. That will reduce the income generated by our portfolio.

[myrdale]

I'm not purchasing or refinancing a house so it has no affect on me there.

I'm not buying a car on a loan, so that doesn't affect me either.

Since I pay my two credit cards off on a monthly basis, it has no affect either.

I have an emergency fund in a money market at a local credit union. There may be better deals out there that could bring more interest in. That said the convenience of local branches is worth the loss of a hand full of change each year.

Does it affect me in unforeseen ways through the business I do throughout my life? Probably, but I can't measure or control that.

My advice is focus on the economics present at your kitchen table, and don't sweat those of Washington.

[kork13]

My advice is focus on the economics present at your kitchen table, and don't sweat those of Washington.

This exactly.

The direct influence of federal interest rates on my life or my choices is pretty much zero for me ... No current or projected debts, and the money I have in savings/MM accounts is <$50k -- essentially petty cash, relative to our $2M+ other assets. I know there are indirect influences with the stock/bond/other investment markets .... But even those influences don't impact my life, because by & large I never pay attention to my balances.

[ua_guy]

The fed's rate affects all kinds of borrowing costs between businesses, governments, and obviously, investments. This isn't a 'stick your head in the sand' moment where only kitchen table finances matter. I can appreciate the fact that people don't feel affected, but at least pay attention to how rate changes influence things outside of the kitchen. This is a financial message board. Now would be a great time to bone up on this stuff.

[disneysteve]

What's happening in Washington directly affects what happens at your kitchen table. When borrowing costs go up, that raises operating expenses for businesses which leads to higher prices for most everything. No we can't control it, but it definitely impacts us.