The Federal Reserve decided to delay additional rate cuts for now and keep interest rates unchanged at its first meeting of the year, giving themselves time to assess whether inflation is cooling and how President Donald Trump’s policies might impact the U.S. economy.

The decision means the Federal Open Market Committee (FOMC) will keep its benchmark federal funds rate at 4.25%-4.5%, a target range last seen in early 2023. Before then, rates hadn’t been this high since 2007. The move indicates that rates for many of the borrowing costs consumers pay — ranging from credit cards and auto loans to home equity lines of credit (HELOCs) and adjustable-rate mortgages — will likely stay steady in the coming weeks. Savers, meanwhile, will still be able to take advantage of the highest yields in over a decade if they park their cash in a high-yield savings account.

The U.S. central bank has so far cut interest rates a full percentage point from a 23-year high of 5.25%-5.5%. Officials kick started the lower-rate era with a massive half-point cut in September, fearing the job market was losing steam too quickly. Inflation also looked like it was steadily slowing, cooling to 2.4% year-over-year after soaring as high as 9.1% in June 2022.

Economic data has since been revised up, while inflation last year made barely any progress in its path back toward the Fed’s 2% target. After announcing the Fed’s third straight interest rate cut in December, Fed Chair Jerome Powell said officials planned to move “more cautiously” with interest rate cuts in the year ahead. They don’t think that the labor market needs to slow more to achieve their inflation goals, but they also don’t think they need to rush to cut interest rates now that the U.S. economy looks stable, Powell said.

In a post-meeting statement released with the decision, officials wrote that the unemployment rate had “stabilized” and the labor market “remains solid.” In a sign that they’re worried about inflation, they also removed a sentence that stated inflation was moving toward the Fed’s 2% objective.

From the sidelines, Fed officials will be hoping to gain more confidence that inflation is cooling. They’ll also likely be monitoring Trump’s plans for stricter immigration, deportations, tax cuts and tariffs. Economists surveyed by Bankrate say those policies might reignite price hikes and juice up the U.S. financial system, though higher import taxes could also weigh on growth if other countries start retaliating.

For now, the message to consumers is clear: Interest rates are not coming down as quickly as they surged. Continue paying down high-interest credit card debt, compare offers from multiple lenders if you need to borrow right now and consider refinancing if a money-saving opportunity presents itself.

“Until inflation shows broad and sustained improvement, we’re unlikely to see any rate cuts,” says Greg McBride, CFA, Bankrate chief financial analyst. “Progress toward 2% inflation has stalled out, and the Fed knows it. They gave no indication in their post-meeting statement that a resumption of rate cuts is likely at the next meeting in March.”

What the Fed’s decision means for savers

Savers have emerged as the clear winner in today’s high-rate era — at least if they’re parking their cash in a place where it’s rewarded. Yields are currently the highest in over a decade, and interest rates remaining higher for longer means they’ll likely stay that way.

The highest-yielding savings account on the market is currently offering an annual percentage yield (APY) of 4.75%, well above the current rate of inflation (2.9%, according to the Bureau of Labor Statistics’ consumer price index). At this time last year, the best offers on the market were expected to have fallen to 4.45%, according to Bankrate’s 2024 Interest Rate Forecast.

Yields on certificates of deposits (CDs) are also elevated. The top-yielding five-year CD is currently offering a 4.25% APY. The best 2-year CD rate on the market has edged higher over the past few weeks, rising from 4.2% at the start of the year to 4.4%. CD yields are fixed, meaning they stay the same until maturity — even if the Fed cuts interest rates. Better yet, they come with Federal Deposit Insurance Corp. (FDIC) insurance, helping Americans earn a market-like return without any risk.

However, not all depositors are reaping the benefits of a high-rate era. Yields on savings accounts at the nation’s biggest banks, such as Chase and Bank of America, are the same today as they were when the Fed’s key rate was near-zero, hovering between 0.01%-0.05% APY.

Borrowers

To the Americans waiting on the sidelines for interest rates to drop, last year’s rate cuts likely haven’t made much of a difference. Car loans, credit card rates and HELOCs have all edged lower, but they’re still the highest in over a decade, according to interest rate data tracked by Bankrate. Meanwhile, most financing rates that consumers see across the market haven’t fallen as much as the Fed’s key interest rate.

To be sure, unsecured debt on a credit card is never low enough to be manageable. The average rate on a credit card hovered above 16% when interest rates were near-zero. Today, they’re still above 20%, Bankrate data shows.

If you’re trying to eliminate your credit card debt, Bankrate’s rankings of the best balance-transfer cards currently give Americans an introductory 0% annual percentage rate (APR) for as long as 21 months. That means you’ll be able to make payments toward your balance without having to pay anything in interest — helping you accelerate your debt repayment. Transferring your balance, however, comes with a cost, usually between 3% to 5% of the total debt that you transfer.

Borrowers might also be tempted to try and time the market, delaying any big-ticket purchases in the hopes that interest rates eventually come down. Yet, the Fed is projecting to cut interest rates only twice this year, according to its latest estimates. If it comes to fruition, borrowing costs will still be the highest in over a decade this year — suggesting that potential savings from delaying your purchase may be limited.

Homeowners and homebuyers

Homebuyers waiting for lower mortgage rates have been sorely disappointed. The Fed’s rate cuts have done nothing to bring down historically high mortgage rates. The national average rate on a 30-year fixed mortgage has been stuck above 7% for most of January, rising 86 basis points since the Fed’s first rate cut in September. Future rate cuts from the Fed aren’t guaranteed to provide much help, with longer-term interest rates more closely tracking the 10-year Treasury yield.

Meanwhile, home prices topped another record high in November, though the pace of those price gains has slowed, according to the latest data from S&P CoreLogic’s Case-Shiller Home Index. That might’ve continued in December, with the latest data from the National Association of Realtors (NAR) also showing that existing-home sale prices topped another record for the month.

High mortgage rates were thought to be abnormally high. Now, the longer they stay elevated, a new question is emerging: Could this be the new normal?

The housing market has cooled — at least somewhat — from its red-hot pandemic-era state. Five years ago, homes were selling before even listing on the market, sellers were getting wooed by all-cash buyers and Americans trying to buy were getting stuck in the middle of bidding wars.

Supply is getting a little bit better, and homes are staying on the market for a little bit longer. The housing market currently has a 3.3-month supply of homes on the market as of December, according to data from the National Association of Realtors (NAR). Supply continues to remain depressed (a balanced market is thought to have 5-to-6 months’ worth of inventory) but it’s marked improvement from a low of just 1.6 months in January 2022.

Mortgage rates are poised to stay elevated until there’s a clearer path toward lower inflation. Timing the market, however, can be a fool’s game. Americans who can find a home in their price range might miss out on the deal if they continue to wait for lower rates that might not come.

Meanwhile, if you’re still priced out of the housing market, take advantage of opportunities that can help set yourself up for home ownership in the future. Those include bolstering your savings and income, as well as paying down debt.

Investors

It’s been a tale of two financial markets since President Donald Trump’s inauguration. On the one hand, the prospect of lower taxes and looser regulations have put a pep in investors’ steps, with the S&P 500 up more than 5% since the beginning of November. On the other hand, Treasury markets have been in a deep slump, as investors brace for tariffs and stricter immigration that risks leading to more inflation.

The artificial intelligence (AI) boom was also briefly interrupted on Monday after news of a China-based competitor sent tech stocks tumbling over concerns that the U.S. might not be as ahead in the race than originally thought.

But pay no mind to the bogeyman of the day if you’re a long-term investor. Significant buying opportunities can happen when markets are in the red, and changing your strategy because of day-to-day fluctuations could risk solidifying a loss.

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