The Fed keeps rates steady while warning of increasingly uncertain economic outlook

The Federal Reserve left interest rates unchanged Wednesday at its March meeting, acknowledging that tariffs are expected to slow the economy and have likely already lifted inflation. 

The Federal Open Market Committee’s (FOMC) decision means that its key borrowing benchmark rate will stay in a target range of 4.25-4.5 percent, a historically elevated level that consumers hadn’t experienced for over a decade — at least prior to the COVID-19 pandemic. 

If you’re thinking about financing a big-ticket purchase or renovating your home, the Fed’s latest move means that borrowing costs on products such as credit cards, auto loans, home equity lines of credit (HELOCs), adjustable-rate mortgages and more will stay high. If you have some cash in a high-yield savings account, though, you’ll continue to be rewarded with the best returns in over a decade.

So far in 2025, the Fed has been in wait-and-see mode as policymakers contend with two main concerns about the Trump administration’s agenda. On the one hand, higher tariffs threaten to push up prices at a time when the Fed’s years-long post-pandemic inflation fight is still ongoing. On the other, higher import taxes make it harder for companies to produce as many goods and services, weighing on economic growth. Stricter immigration policy, deportations and federal spending cuts could also compound those challenges. 

Fed Chair Jerome Powell said at the Fed’s post-meeting press conference that officials are focused on the net impact of all of those policy changes. Yet, tariffs appeared to be the primary reason why officials downgraded their forecasts for economic growth in 2025 and projected higher inflation through 2026 in an update to their Summary of Economic Projections (SEP).

“Inflation has started to move up now, we think partly in response to tariffs,” Powell said, adding that all Fed officials have tariff inflation factored into their inflation forecasts. “There may be a delay in further progress over the course of this year.”

The Fed, though, still expects to cut interest rates two times in 2025, according to the median rate estimate. Weaker economic growth is expected to offset some of the inflation from tariffs, Powell said, helping pave the path for those cuts. 

Stocks rallied on the news, a welcome respite from a market sell-off that briefly sent the S&P 500 into correction territory. During Trump’s first-term trade war, Fed officials cut interest rates three times to help shore up economic growth. But that was before price pressures burst in the aftermath of the pandemic. Inflation has cooled since then, though it’s still elevated, rising 2.8 percent in February from a year ago, according to the latest data from the Bureau of Labor Statistics. 

For now, though, Powell said the best course of action is standing pat and awaiting more clarity in the data. 

“This Fed meeting showcased the difficulty in making decisions in periods of uncertainty,” says Charlie Ripley, senior investment strategist for Allianz Investment Management. “Perhaps the best action is no action at all.”

With weaker growth — not slower inflation — now appearing to be the catalyst for lower interest rates in 2025, Americans might have to contend with rate cuts happening for “bad” reasons than “good.” 

The Fed’s interest rate decision: What it means for you

Savers

Yields haven’t been rising as quickly as they once were, but savers have still been benefiting because their returns are outpacing inflation — at least when they park their money in a high-yielding bank. Any increase in inflation, however, could jeopardize those gains. 

Threats of elevated inflation underscore the importance of making sure you’re keeping your cash in the right place. The highest-yielding savings account on the market is currently offering an annual percentage yield (APY) of 4.5 percent, according to Bankrate data. That’s almost 10 times higher than the national average APY of 0.47 percent. 

Keeping your money in a high-yield account can help you safeguard your purchasing power — and grow your emergency fund even faster. Americans are usually advised to keep between six to nine months’ worth of cash in a liquid and accessible account to help cover any unexpected expenses. 

Those funds can also bridge you through a spell of unemployment. It’s too soon to say whether the U.S. economy will enter a recession, but periods of slower economic growth often mean slower hiring and longer durations of joblessness. 

If you already have enough funds set on the side, a certificate of deposit (CD) could complement your portfolio. Savers currently have the opportunity to lock in a yield greater than 4 percent for at least two to five years, even if the Fed cuts interest rates, according to the top-yielding 5-year and 2-year CDs that Bankrate tracks. 

Borrowers

If you’re looking for ways to cut back on your expenses and scale up your emergency fund contributions, you might want to focus first on eliminating any high-interest debt. 

Credit card rates are now the lowest in almost two years, but they’re still above 20 percent, according to Bankrate data. Even when the Fed’s interest rate held at rock bottom, the national average annual percentage rate (APR) was hovering around 16 percent. 

Making just the minimum payment can still put your finance budget under stress. Paying just interest plus 1 percent of your balance on a $5,000 credit card balance every month would take 23 years — and almost $8,000 — to pay off, according to Bankrate’s minimum payment calculators.

Consider calculating the cost of transferring your debt to a balance-transfer card, a process that usually comes with a fixed fee between 3-5 percent of your total debt. If the savings outweigh the costs (and if you can pay off your balance by the time the 0 percent introductory APR expires), you might stand to speed up your debt repayment.  

Meanwhile, if you’re on the verge of making a big-ticket purchase that requires financing, keep a close watch over your credit score. Lenders reserve their most competitive offers and rates for borrowers who appear to be the least risky. On-time payments and your credit utilization ratio are some of the most impactful factors in calculating your overall score. 

Nearly half of Americans (45 percent) said they have applied for a loan or financial product between December 2023 and December 2024, according to Bankrate’s annual Credit Denials Survey. Yet, 48 percent of those applicants faced a rejection on at least one application, a symptom of the current high-rate era.

Homeowners and homebuyers

Prospective homebuyers waiting for lower mortgage rates have gotten some relief — but it might not be for good reasons. The 30-year fixed-rate mortgage averaged 6.77 percent APR nationally in the week that ended on March 12, down from 7.19 percent in January, according to Bankrate data. That happened, though, as growth concerns weighed on the 10-year Treasury yield, which has dropped almost half a percentage point since the start of the year. 

Those forces might keep some pressure off of home prices, according to McBride. The drop in mortgage rates might not be coupled with a jump in housing demand if homebuyers are worried about the direction of the economy. 

“If mortgage rates fall because of concerns about an economic slowdown, that is not going to bring droves of would-be buyers off the sidelines,” McBride says. 

Few experts would say the U.S. housing shortage is over, but supply restraints have eased somewhat since the pandemic-era days when all-cash offers and bidding wars dominated the market. The housing market currently has a 3.5-month supply of homes on the market as of January, according to data from the National Association of Realtors (NAR), a marked improvement from a low of just 1.6 months in January 2022. 

If you still can’t find a home in your price range, you can still prepare your finances for homeownership by bolstering your savings, paying down debt and growing your income.

As for homeowners, HELOCs are now the lowest in almost two years after the Fed’s three rate cuts in 2024, according to Bankrate data. It’s tempting homeowners to tap their record amount of home equity, but remember: Those borrowing costs are still at a decade-plus high. 

Investors

It’s been a rough stretch for the stock market, as volatile tariff announcements give investors whiplash. The S&P 500 has fallen more than 8 percent below its record high and briefly plunged 10 percent, breaching a threshold that financial analysts describe as a “correction.” 

Experts say downdrafts in the market are always a good time to revisit your asset allocation. Yet, if you’re invested for the long haul and already diversified, you might do more harm to your portfolio than good if you sell off any investments when they’re in the red or dump equities for lower-risk investments. Historically, investing in financial markets is the best way to grow your wealth faster than inflation, even when adjusting for downturns in the market.

If you’re closer to or already in retirement, consider keeping a few years of cash or cash equivalents on hand. But since retirement can last several decades, retirees will usually still need to invest in stocks so their savings can keep growing. 

Financial pros agree that it’s best to keep a long-term perspective and tune out the noise. Remember: Timing the market is not as powerful as time in the market.