Federal Reserve Chairman Jerome Powell recently kept interest rates steady, defying calls for a cut and signaling a continued cautious approach. Despite external pressures, the federal funds rate remains at 4.25%, a level it has held since before Christmas. This extended period of unchanged rates has distinct effects across various aspects of personal finance.
How the interest rate pause affects checking and savings accounts
For those holding cash in traditional checking and savings accounts, the returns remain minimal. Checking accounts, valued for their liquidity and transactional convenience, continue to offer negligible interest, with the national average still hovering around 0.07%.
Savings accounts have seen a slight decline in average interest rates, now at approximately 0.38%. However, "savvy savers" are turning to high-yield savings accounts, which have consistently offered rates in the 4% range, making them a much more attractive option for substantial savings. Similarly, while traditional money market accounts offer low payouts (around 0.59% nationally), high-yield money market accounts present a better alternative, also near or exceeding 4% for those looking to keep larger sums accessible yet earning a competitive return. The key takeaway for deposit accounts is that active shopping for the best rates, particularly in the high-yield sector, can significantly boost your earnings.
What an on-hold Fed interest rate policy does to CDs
Certificate of Deposit (CD) rates have been slowly decreasing. A 12-month CD currently averages 1.62%. For investors willing to explore options beyond their immediate locality or primary bank, better rates can still be found. The minimum deposit and chosen term typically influence the rate offered.
What the latest Federal Reserve rate pause will mean for mortgages and personal loans
The housing market continues to grapple with elevated mortgage rates, generally remaining in the upper 6% range. It's important to remember that the Fed's short-term rate decisions don't directly control mortgage rates, which are more influenced by the bond market and forecasts for economic growth. Analysts from leading housing industry bodies anticipate these rates will stay within the 6% to 7% band for the rest of the year.
Personal loan interest rates have been notably stable, holding around 12% for over a year. While significantly higher than the 9.5% average seen between 2020 and 2022, a return to those lower rates is not expected in the near term.
What happens to credit cards when the Fed holds interest rates
Credit card interest rates continue to be a significant concern for consumers, especially those carrying a balance. Rates have climbed from approximately 15% in 2021 to over 21% in 2025. Despite previous Fed rate cuts, credit card companies have largely maintained these higher rates. A proactive step for consumers with good payment history and improving credit scores is to contact their credit card provider and inquire about a lower interest rate, as this can sometimes yield immediate benefits.
How the Fed's interest rate policy impacts your investments
While the Fed's rate decisions can influence stock prices, they are just one component of a much broader investment landscape. Investors should monitor overall economic trends and corporate profit forecasts alongside interest rates. For those preferring a more conservative investment approach, focusing on high-quality stocks that have historically performed well across various economic cycles and maintaining a long-term perspective remains a sound strategy.
