Fed likely to hold interest rates steady despite Trump’s pressure
Before the federal reserve meeting of the next week, relations between President Donald Trump and FED President Jerome Powell fell.
“Families are injured because interest rates are very high,” Trump said. Real social Post on Wednesday.
Trump said he wanted the FED to reduce interest rates by 3 percent to encourage economic growth. (Although the Central Bank typically adjusts its criterion 25 Based IncreasesThe odds approached zero as much as Covid pandem. “The Fed only resorts to such extreme measures in response to serious economic distress,” Bankrate’s financial analyst Greg McBride said. He said.
The President claimed that the preservation of a very high federal fund ratio makes it difficult for businesses and consumers to borrow and put the US into an economic disadvantage in countries with lower rates.
The Fed’s criterion determines what banks charge each other for lending overnight, but at the same time there is a drip effect on almost all the borrowing and saving rates that Americans see every day.
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Powell said that at the beginning of this month, the FED would reduce rates so far, but that Trump continued due to the uncertainty and inflation risks revealed by the tariff agenda. Many economists say that the full impact of tariffs on pricing has begun to feel new and that inflation can take in the second half of the year.
Since December, the federal fund rate has remained constant in a target range of 4.25% to 4.5%. According to the CME Group, the futures market pricing implies that the FED does not mean that an interest rate is almost reduced when it is collected next week. Fedwatch indicator. Market pricing shows that the Fed is more likely to consider a ratio deduction in September.
When the FED fund ratio decreases, consumers can see that borrowing costs begin to decrease.
However, Brett House, an economic professor at Columbia Business School, said, “largely, especially because the borrowing rates are not compared with the Fed,” there is no guarantee that this will turn into lower rates. “
Take a look at how the FED affects your financial situation, from mortgage ratios and automobile loans to credit cards and savings accounts.
Mortgage
Trump said July 23 on social media post “The housing in our country is delayed because Jerome refuses to lower Powell interest rates too late.”
However, constant mortgage ratios, especially do not follow the Fed directly: they are largely dependent on the Treasury returns and the US economy. Since the concerns about tariffs and a wider economy Drive are given higher, mortgage ratios are also stubbornly high.
According to Bankrate, the average ratio for a 30 -year -old mortgage with a fixed interest rate is currently close to 6.8%. The problem of limited inventory and residential consensus throughout the country is a key issue regardless of the Fed’s next move.
Raymond James Chief Economist Eugenio Aleman, said in a statement, the housing market “high house prices and high mortgage rate continues to fight,” he said. According to the latest data, the average price of a house sold reached a record level in June.
Credit Cards
Most Credit cards have a variable ratio, so there is a more direct connection with the Fed’s criterion.
Nevertheless, regardless of the next move of the Central Bank, credit card rates are high and are likely to remain there. According to Bankrate, the average percentage of the annual percentage is currently slightly above 20% All time registration.
“Credit card rates are very high in the model.” He said.
Most experts say that even if APRs are 3 percent lower, it will not significantly alleviate the burden of a rotating balance.
Automatic Loans
According to Bankrate, the average ratio in a new five -year -old car loan is 7.22%.
“Consumers are constantly stretching to obtain new vehicles in this market,” Edmunds’s Insights Director Ivan Drury said. He said. Now, the share of new car buyers with car payment More than $ 1,000 per month at the highest level of all time.
Student Loans
Saving
On top, the top online According to Bankrate, savings accounts still offer a average return and currently pay more than 4%.
Although the Central Bank had no direct impact on the deposit rates, returns tend to be related to changes in the target federal fund rate, so keeping this rate unchanged has kept the savings rates above the inflation rate, which is accepted as a rare gain.
“It is not a good time to be indebted, but a great time to save – it leans.” He said.
