Interest rates moved lower near the end of 2024 as the Federal Reserve cut rates three times, shaving a full percentage point off the federal funds rate since September. In 2025, that trend is likely to continue.

But with inflation still above the Fed’s 2% target, a strong labor market and a new administration, the central bank already indicated that it would move more slowly on rate cuts in the year ahead.

Federal Reserve officials reduced their outlook for expected cuts in 2025 to two from four, assuming quarter-point increments, according to minutes from their December meeting.

“Robust U.S. economic data heightened concerns that the Federal Reserve may see little scope for cutting rates in 2025,” Solita Marcelli, chief investment officer Americas for UBS Global Wealth Management, wrote in a research note.

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Experts anticipate the Fed will hold steady on interest rates at its Jan. 28-29 meeting, and follow with only a few rate cuts through the year. Given that, most Americans can expect to see their financing expenses ease, but not by much, said Greg McBride, chief financial analyst at Bankrate.

“Rates were abnormally low for the better part of 15 years, and they’ve been abnormally high for the last two,” he said. “They’re coming down, but where they’ll settle out is going to be a level that’s higher than what we had seen before 2022.”

Although Fed officials indicated two cuts, McBride expects as many as three coming over the course of the year, bringing the key benchmark rate to 3.5%-3.75%. Although that’s not the rate consumers pay, the Fed’s moves still affect the borrowing and savings rates consumers see every day.

From mortgage rates and credit cards to auto loans and savings accounts, here are his predictions for where rates are headed in the year ahead:

Prediction: Credit card rates fall to 19.8%

Since the central bank started cutting interest rates, the average credit card interest rate has only edged off extremely high levels. 

Going forward, annual percentage rates aren’t likely to improve much more. McBride predicts that the average APR on a credit card will fall to 19.8% by the end of 2025, down about half a percentage point from where it stands now. 

Cardholders usually see the impact within a billing cycle or two. But for those carrying a balance from month to month, “borrowers need to press on with debt-repayment efforts,” McBride said. Rates “won’t be coming down quickly enough to provide meaningful relief.”

Prediction: Mortgage rates to hit 6.5%

“Mortgage rates have gone up — not down — since the Fed began cutting interest rates in September,” McBride said.

McBride now expects mortgage rates to “spend most of the year in the 6% range,” he said, “with a short-lived spike above 7%.”

The 30-year fixed-rate mortgage could end the year at 6.5%, he projected. But since most people have fixed-rate mortgages, their rate won’t change unless they refinance or sell their current home and buy another property. 

Prediction: Auto loan rates edge down to 7%

When it comes to their cars, consumers have been facing bigger monthly payments, thanks to higher vehicle prices and elevated interest rates on new loans.

While anyone planning to finance a new car could benefit from lower rates to come, affordability concerns won’t change significantly.

Five-year new car loan rates are expected to fall to 7% from 7.53%, while four-year used car financing costs could drop to 7.75% from 8.21% by the end of the year, according to McBride.

Prediction: High-yield savings rates dip below 4%

In recent years, top-yielding online savings accounts have offered the best returns in over a decade and still pay nearly 5%, according to McBride.

Even though those rates are falling, “they’re coming down slowly, and they’re still well above inflation,” McBride said.

McBride predicts that top-yielding savings accounts and money market accounts could hit 3.8% by the end of 2025, while the top-yielding one-year and five-year CDs will fall to 3.7% and 3.95%, respectively.

“That adds up to a pretty attractive environment for savers,” McBride said.

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As tax filing season starts, 1 million taxpayers are already set to receive automatic payments from the IRS.

That has many people asking, “Will I receive an IRS stimulus check in 2025?” “IRS automatic stimulus payments” is a breakout search, with rising queries related to eligibility, Google Trends data from Wednesday shows.

Those sums are not this year’s tax refund. Instead, the payments of up to $1,400 per individual represent Recovery Rebate Credits that were not claimed by eligible people on their 2021 tax returns.

“Looking at our internal data, we realized that one million taxpayers overlooked claiming this complex credit when they were actually eligible,” IRS Commissioner Danny Werfel said in a December statement when the automatic payments were announced.

“To minimize headaches and get this money to eligible taxpayers, we’re making these payments automatic, meaning these people will not be required to go through the extensive process of filing an amended return to receive it,” Werfel said.

That has led some to wonder whether those stimulus efforts contributed to the inflation spike.

In a recent CNBC interview, Treasury Secretary Janet Yellen said the “spending was necessary” to help avoid the suffering of people losing their livelihoods and businesses.

“It may have contributed a little bit to the inflation,” Yellen said. “But by and large, the inflation was a supply-side phenomenon.”

The goods people wanted from China and other parts of the world faced huge supply chain problems, which pushed up prices, she said.

On Wednesday, new government inflation data showed core inflation — excluding food and energy prices — slowed in December, which helped prompt a stock market rally. Even with that progress, the Federal Reserve still has work to do to reach its 2% inflation target.

After a prolonged period of job gains and wage increases, employers capped off the year by giving their employees bigger year-end bonuses, a new report found.

The average bonus awarded in December was $2,503, on average, up from $2,447 in 2023 — an increase of just over 2%, according to an exclusive look at data from human resource provider Gusto, based on more than 400,000 small- to medium-sized businesses nationwide.

“The average represents about one paycheck. That turns into a pretty significant amount of money especially at the end of the year,” said Gusto’s senior economist, Nich Tremper.

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“This is an economy that ended 2024 much better than expected and small businesses are taking advantage of that — that includes wages and compensation for the current employees,” Tremper said.

Overall, the jobs market remained remarkably strong throughout 2024, other reports show. Employment grew each month and, as of the latest reading, the unemployment rate edged down to 4.1% in December. Average hourly earnings also increased 0.3% last month.

In a tight labor market, some employers use bonuses as a tool to keep their top performers engaged, with fewer companies paying out bonuses to the entire staff, Tremper said. The share of workers receiving a bonus declined in 2024 by almost 2% compared with 2023.

According to Robert Half’s survey of more than 1,600 hiring managers in November, 62% of managers said bonuses were higher in 2024 compared with the year before and 28% offered bonuses in line with 2023. Only about 5% of managers said bonuses were smaller than they were previously.

For workers, “money always ranks near the top in perks,” Reisdorf said. However, priorities have also shifted, largely since the pandemic. These days, employees are more likely to consider work-life balance, flexible hours and mental health support as equally important.

To that end, workers increasingly value flexible or hybrid work schedules, extra paid days off, additional options for health insurance or more robust retirement saving plans, Reisdorf said: “The key one is flexibility.”

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