The Federal Reserve paused interest rate cuts at today’s meeting. Suffice it to say, this wasn’t the most interesting decision of 2025 so far.
Still, given that the Fed cut interest rates three times in 2024, we were hoping for a path toward lower borrowing costs. Last week, President Donald Trump said he would demand that interest rates drop immediately.
The Fed is currently in a holding pattern. There’s too much uncertainty about the incoming administration’s policies, especially regarding immigration and trade, to make any major policy shifts.
While the Fed is expected to hold interest rates steady for a while, anything could change in the next few months. Future decisions about interest rates will impact our finances, including how much we earn from our savings accounts, how much extra we owe for carrying credit card debt and whether we can afford to take out a car loan or a mortgage.
Here’s a quick primer on interest rates and what today’s Fed decision could mean for your money.
Read more: Trump Can’t Lower Interest Rates. But What Power Does the President Have Over the Fed?
How the Fed determines interest rates
The Fed meets eight times a year to assess the economy’s health and set monetary policy, primarily through changes to the federal funds rate, the benchmark interest rate used by US banks to lend or borrow money to each other overnight.
Imagine a situation where the financial institutions and banks make up an orchestra, and the Fed is the conductor, directing the markets and controlling the money supply. So although the Fed doesn’t directly set the percentage we owe on our credit cards and mortgages, its policies have a ripple effect on the everyday consumer.
Interest is the cost you pay to borrow money, whether that’s through a loan or credit card. When the central bank
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