What it means for your money
Federal Reserve Chairman Kevin Warsh makes remarks after being sworn in during a ceremony in the East Room of the White House on May 22, 2026 in Washington.
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The Federal Reserve kept interest rates steady on Wednesday, wrapping up the first meeting under new Fed Chairman Kevin Warsh. The decision provided little relief to consumers struggling to keep up with high gas prices and overall affordability challenges.
Economists say inflation rose last month at the fastest pace in three years and the rise in energy costs could have long-term inflationary effects, although Donald Trump’s pick to head the central bank has previously indicated he might favor low interest rates. Experts say this likely contributed to the decision to leave rates unchanged and could lead the central bank to consider raising borrowing costs instead, as Trump wanted.
“The Fed can no longer pretend that there is a balance of risks; inflation is the problem,” said Certified Financial Planner Stephen Kates, a Bankrate financial analyst.
The prospect of persistently high interest rates and higher borrowing costs could be another financial blow for households at a time when cost pressures are increasing.
“This makes it harder to buy a house, revolving credit is now harder, owning a car is now more expensive,” said Wayne Winegarden, an economist at the Pacific Research Institute, a conservative think tank. Although rates on some of these products are fixed and not immediately affected by the Fed’s moves, “if you’re locking in a higher rate, that’s just another way we’re making life unaffordable for American families,” Winegarden said.
How does the Fed affect your wallet?
The Federal Reserve’s benchmark, called the Fed funds rate, determines how much banks charge each other for overnight lending, but it also has a ripple effect on many consumers. Borrowing and savings rates.
When the Fed raises its benchmark interest rate, borrowing becomes more expensive for consumers and businesses, which can slow the economy and thus inflation; but the impact of the Fed’s actions varies significantly across loan types.
In general, short-term interest rates, such as credit card interest rates, are closely linked to the Fed’s benchmark interest rate. Long-term interest rates, such as mortgage rates, are more affected by Treasury yields and the economy.
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For example, most credit cards have a variable interest rate, so there is a direct link to the Fed’s overnight interest rate.
“Credit card APRs don’t tend to change much unless the Fed forces them, and with no possibility of a Fed rate cut on the horizon, Americans should expect card APRs to remain high for the foreseeable future,” said Matt Schulz, chief credit analyst at LendingTree.
According to Bankrate, the average annual interest rate on credit cards has remained just under 20% since last year.
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Savings rates also tend to correlate with changes in the target federal funds rate. While keeping the Fed’s interest rate unchanged has kept savings returns largely steady, some have begun to decline. Still, the highest-yielding online savings accounts can offer above-average returns and are currently paying over 4%, according to Bankrate.
“If you’re looking for a silver lining with these high rates, look no further than high-yield savings accounts,” Schulz said.
A for sale sign is hung in front of a house for sale in Pasadena, California, on April 13, 2026.
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In contrast, 15- and 30-year fixed mortgage rates do not directly follow the Fed but generally follow the lead of long-term Treasury rates and the economy. As a result, mortgage rates continue to be volatile amid continued uncertainty regarding tensions in the Middle East.
As of June 16, the average rate of 30-year fixed-rate mortgages was 6.54 percent, while the average rate of 15-year fixed-rate mortgages was 6.11 percent. Mortgage News Daily.
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Auto loan rates are fixed for the life of the loan, and market rates depend on a variety of factors, including the Fed’s benchmark. But as financing costs remain high, new car buyers are stuck with more expensive vehicles and higher interest rates; This may force them to choose between higher monthly payments and longer repayment terms.
“Until the exchange rate table changes, buyers will continue to extend loan terms to make payments affordable, accruing more interest over the course of their terms as an unfortunate byproduct,” said Edmunds consumer insight analyst Joseph Yoon.
With the Fed’s benchmark holding steady, the average rate on a five-year loan for a new car was 6.9%, while the average auto loan rate for a used car was 10.4%, according to Edmunds.
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