How The Fed’s Latest Moves (Or Lack Thereof) Affect Your Finances

The Federal Reserve’s decision to hold its key interest rate steady on Wednesday had implications for the U.S. economy—and for financial matters much closer to home.

Rates on all kinds of loans have responded to the Federal Reserve’s recent moves, directly affecting household finances. Starting in September, the Fed cut its influential fed funds rate by three-quarters of a point to stabilize the faltering job market, putting downward pressure on interest rates across other financial instruments.

The Fed’s hold is seen by financial markets as a pause in its rate-cutting campaign, rather than the end of it. Traders are pricing in a likelihood that the Fed will cut its key rate again this summer, which could further push down interest rates.

Here’s how the Fed’s latest moves have influenced personal finances.

It Still Pays, At Least A Little, To Hold Cash

You can still get some interest on your money by parking it in a Certificate of Deposit or high-yield savings account, although you can’t expect the same kinds of returns you would get with a riskier investment such as a stock market index fund.

As of Friday, the best CD you can get pays 4.5% for a 7-month term, according to Investopedia’s data—that’s down from the 5.5% yield on an 8-month CD you could get in January 2025, but it’s well above the rate of inflation, which is around 3% depending on how you measure it. That means the buying power of your cash isn’t evaporating even if it’s not growing spectacularly.

Plastic Is Barely Less Painful

The fed funds rate directly influences rates on consumer loans, such as credit cards, which are tied to banks’ prime rates. Credit card interest has declined in recent months, although it’s still high enough to be punishing to hold in any amount. As of November, the average card interest rate was 21%, down from 21.5% in November 2024, according to the Federal Reserve.

That means the Fed has made credit card debt slightly less harmful than it was recently, but it’s still worth paying down at the earliest opportunity.

Is Buying A House Worth A Second Look?

Home ownership has been out of reach for many would-be buyers for years because of soaring prices and high mortgage rates. And those who already own houses have been reluctant to sell and give up the lower mortgage rates they got years ago when rates were at rock bottom.

But that may be changing. Fed rate cuts don’t have the same direct impact on mortgage rates as they do on other borrowing costs, but they still have some influence. A confluence of Fed rate cuts and economic uncertainty has resulted in modest declines in mortgage rates.

The average rate offered for a 30-year mortgage last week was 6.10%, down from 6.95% in January 2025, according to Freddie Mac.

Many home buyers and sellers are looking at the math and finding that it’s more favorable than it was a few months ago.

“You’re seeing existing homeowners kind of removing the golden handcuffs a little bit, where rates aren’t that much higher than what their existing rate is and opening up a little bit for folks first-time home buyers to get in and purchase their starter home,” said Brian Walsh, head of advice and planning at SoFi.

Indeed, the frozen-over housing market is finally starting to thaw a bit, with existing-home sales picking up in December, according to the National Association of Realtors.

“In the fourth quarter, conditions began improving, with lower mortgage rates and slower home price growth,” Lawrence Yun, chief economist at the NAR, said in a press release. “December home sales, after adjusting for seasonal factors, were the strongest in nearly three years.”