The Federal Reserve is anticipated to maintain the current interest rate during its upcoming two-day meeting, even as recent inflation data shows signs of retreat. However, increasing trade tensions could pose inflationary risks for the economy, impacting prices on various consumer goods.

Andrzej Skiba, the head of U.S. fixed income at RBC Global Asset Management, noted the potential for tariffs on Europe and others in the coming weeks, stating, “This will be inflationary, and the Fed won’t likely be able to cut rates in this environment.”

Understanding the Federal Funds Rate

The federal funds rate plays a crucial role in determining what banks charge each other for overnight borrowing. This rate also significantly influences consumer borrowing and saving rates. Greg McBride, chief financial analyst at Bankrate.com, stated, “Consumers are stretched and stressed,” highlighting the challenges faced by households in the current economic climate.

As rates eventually decrease, consumers could benefit from lower borrowing costs in various loan categories, including auto loans and mortgages. Current trends indicate some relief for households, with mortgage and credit card rates beginning to edge lower, though they remain high compared to historical standards.

Current Mortgage Rates

Mortgage rates, typically fixed for 15- and 30-year loans, have shown a downward trend. Concerns regarding a potential recession and uncertainty related to tariff policies have pressured rates lower, as reported by the Mortgage Bankers Association. Matt Schulz, chief credit analyst at LendingTree, expressed optimism, stating, “The good news is that even though the Fed has taken its foot off the gas when it comes to rate cuts, mortgage rates have fallen.” The average 30-year mortgage rate now stands at 6.77%, down from 7.04% earlier in the year.

Trends in Credit Card Rates

Credit card rates are typically variable, very much linked to the Federal Reserve’s rate adjustments. Despite the Fed’s recent rate stability, the average annual percentage rate (APR) has also witnessed a slight decline, currently at 20.09%, compared to 20.27% at the beginning of the year. Schulz commented on the ongoing trend, noting that March marked the sixth consecutive month of decline, albeit at a slowing pace due to lagging impacts of past Fed cuts.

Nevertheless, consumers are still grappling with rising credit card debt, which increased by 8.2% year-on-year. Meanwhile, non-revolving debts such as auto and student loans saw a 3% uptick, as reported in the Federal Reserve’s latest consumer credit report.

Auto Loan Insights

While auto loan rates are fixed, buyers continue to face rising payments due to escalating vehicle prices and uncertainties surrounding trade policies. Schulz mentioned the troubling implications for car buyers, stating that they are confronting “high rates and high prices” with the possibility of further price hikes from tariffs. Fortunately, average auto loan rates have decreased slightly, with the average rate for a five-year new car loan now at 7.42%, down from 7.53% in January.

Federal vs. Private Student Loans

Most federal student loans have fixed interest rates, providing some insulation from the Fed’s adjustments. For undergraduate students who took out direct federal loans for the 2024-25 academic year, the interest rate has risen to 6.53%, compared to 5.50% in the 2023-24 academic year. Rates for private student loans, however, often depend on market fluctuations and may vary based on the prime rate or Treasury yields.

Current State of Savings Accounts

On a brighter note, online savings accounts are offering the best returns seen in over a decade, averaging about 4.4%, according to Bankrate. McBride remarked that while Fed rates remain unchanged, “savings rates are still at attractive levels” and even exceed inflation rates, benefiting consumers looking to grow their savings during this period.