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Higher rates to linger, Fed may make cuts in September

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Market expectations are calling for two interest rate cuts before the end of the year. (iStock)

The Federal Reserve announced plans on Wednesday to keep the federal funds rate range at 5.25% to 5.5%, where rates have held steady since last July. 

Fed Chair Jerome Powell told reporters that the central bank has gained greater confidence that inflation is moving towards its 2% target rate, indicating that rates were not lowered this time but could soon be. Market expectations are forecasting a 25 basis point rate cut by the central bank’s September meeting. On Wednesday, the Mortgage Bankers Association said they anticipate two rate cuts this year, with the expectation that inflation will continue to moderate.

“The Fed is walking a tightrope regarding the nation’s economy as it seeks to balance the risks of a slowing labor market while ensuring continued disinflation,” CoreLogic Chief Economist Dr. Selma Hepp. “At this point, the odds of soft-landing keep growing, but there will not be any actions until their next meeting in September. Lower mortgage rates in recent weeks suggest the mortgage markets are also anticipating a rate cut, which should boost buyer demand at the end of the year.” 

Homebuyers can find competitive mortgage rates by shopping around and comparing options. You can visit an online marketplace like Credible to compare rates with multiple lenders at once.

MIDDLE-INCOME AMERICANS FEEL MORE OPTIMISM ABOUT FINANCES AND ECONOMY’S DIRECTION: SURVEY

Rate reduction could spur borrowing

Consumers could finally start to see some relief with the possibility of two rate reductions for 2024 still on the table, according to Michele Raneri, vice president and head of U.S. research and consulting at TransUnion.

Lower rates will likely grow consumer demand for credit for large purchases such as homes and autos. Mortgage rates have already started to drop as the likelihood of interest rate cuts heats up and early indicators suggest that consumers are becoming more interested in new mortgages, according to Raneri.   

“Consumers continue to have demand for credit, although when it comes to extending new credit, lenders have begun pivoting more to those consumers in higher credit risk tiers as a way of mitigating risk,” Raneri said. “It remains to be seen if a reduction in interest rates allows for credit to once again be more accessible for riskier potential borrowers. “

Using a personal loan to pay off high-interest debt at a lower rate could help you reduce your expenses and put money back in your wallet. Visit Credible to find your personalized interest rate today.

76% OF BUY NOW, PAY LATER USERS SAID IT HELPED IMPROVE THEIR FINANCIAL SITUATION BUT BEWARE OF RISKS: SURVEY

U.S. consumer cuts back on economic activity

Most U.S. consumers think interest rates are too high and have had to cut back on spending as a result, according to a recent Morning Consult survey. Over half (68%) of respondents said rates were to say it’s affected their household finances. As a result, 75% have cut back on non-essential spending and 63% have reduced their spending on essentials. 

Moreover, even as the Fed has signaled that it plans to do at least one rate cut this year, 34% of respondents believe that interest rates will be higher at this point next year (34%) than lower (25%). 

“The Fed decided today to not reduce interest rates and did not give a clear signal that a decrease would be coming in September,” Morning Consult economist Sofia Baig said. “Continuing to keep rates elevated could be harmful for consumers and the economy as a whole, which is already showing signs of cooling. Furthermore, Morning Consult survey data reveals that a majority of consumers believe rates are too high and are cutting back on their economic activity as a result, a warning sign of downside risks going forward.”

If you’re worried about the state of the economy, you could consider paying down high-interest debt with a personal loan at a lower interest rate. Visit Credible to speak with a personal loan expert and get your questions answered.

HIGH HOMEOWNERS INSURANCE RATES SCARING AWAY FLORIDA HOMEBUYERS, OTHER STATES FACE THE SAME ISSUE

Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.

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Buffett denies social media rumors after Trump shares wild claim that investor backs president crashing market

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Berkshire Hathaway responds to 'false reports' on social media

Warren Buffett went on the record Friday to deny social media posts after President Donald Trump shared on Truth Social a fan video that claimed the president is tanking the stock market on purpose with the endorsement of the legendary investor.

Trump on Friday shared an outlandish social media video that defends his recent policy decisions by arguing he is deliberately taking down the market as a strategic play to force lower interest and mortgage rates.

“Trump is crashing the stock market by 20% this month, but he’s doing it on purpose,” alleged the video, which Trump posted on his Truth Social account.

The video’s narrator then falsely states, “And this is why Warren Buffett just said, ‘Trump is making the best economic moves he’s seen in over 50 years.'”

The president shared a link to an X post from the account @AmericaPapaBear, a self-described “Trumper to the end.” The X post itself appears to be a repost of a weeks-old TikTok video from user @wnnsa11. The video has been shared more than 2,000 times on Truth Social and nearly 10,000 times on X.

Buffett, 94, didn’t single out any specific posts, but his conglomerate Berkshire Hathaway outright rejected all comments claimed to be made by him.

“There are reports currently circulating on social media (including Twitter, Facebook and Tik Tok) regarding comments allegedly made by Warren E. Buffett. All such reports are false,” the company said in a statement Friday.

CNBC’s Becky Quick spoke to Buffett Friday about this statement and he said he wanted to knock down misinformation in an age where false rumors can be blasted around instantaneously. Buffett told Quick that he won’t make any commentary related to the markets, the economy or tariffs between now and Berkshire’s annual meeting on May 3.

‘A tax on goods’

While Buffett hasn’t spoken about this week’s imposition of sweeping tariffs from the Trump administration, his view on such things has pretty much always been negative. Just in March, the Berkshire CEO and chairman called tariffs “an act of war, to some degree.”

“Over time, they are a tax on goods. I mean, the tooth fairy doesn’t pay ’em!” Buffett said in the news interview with a laugh. “And then what? You always have to ask that question in economics. You always say, ‘And then what?'”

During Trump’s first term, Buffett opined at length in 2018 and 2019 about the trade conflicts that erupted, warning that the Republican’s aggressive moves could cause negative consequences globally.

“If we actually have a trade war, it will be bad for the whole world … everything intersects in the world,” Buffett said in a CNBC interview in 2019. “A world that adjusts to something very close to free trade … more people will live better than in a world with significant tariffs and shifting tariffs over time.”

Buffett has been in a defensive mode over the past year as he rapidly dumped stocks and raised a record amount of cash exceeding $300 billion. His conglomerate has a big U.S. focus and has large businesses in insurance, railroads, manufacturing, energy and retail.

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Stocks making the biggest moves midday: PLTR, CAT, AAPL JPM

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Powell sees tariffs raising inflation and says Fed will wait before further rate moves

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US Federal Reserve Chair Jerome Powell holds a press conference after the Monetary Policy Committee meeting, at the Federal Reserve in Washington, DC on March 19, 2025. 

Roberto Schmidt | Afp | Getty Images

Federal Reserve Chair Jerome Powell said Friday that he expects President Donald Trump’s tariffs to raise inflation and lower growth, and indicated that the central bank won’t move on interest rates until it gets a clearer picture on the ultimate impacts.

In a speech delivered before business journalists in Arlington, Va., Powell said the Fed faces a “highly uncertain outlook” because of the new reciprocal levies the president announced Wednesday.

Though he said the economy currently looks strong, he stressed the threat that tariffs pose and indicated that the Fed will be focused on keeping inflation in check.

“Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem,” Powell said in prepared remarks. “We are well positioned to wait for greater clarity before considering any adjustments to our policy stance. It is too soon to say what will be the appropriate path for monetary policy.”

The remarks came shortly after Trump called on Powell to “stop playing politics” and cut interest rates because inflation is down.

There’s been a torrent of selling on Wall Street following the Trump announcement of 10% across-the-board tariffs, along with a menu of reciprocal charges that are much higher for many key trading partners.

Powell noted that the announced tariffs were “significantly larger than expected.”

“The same is likely to be true of the economic effects, which will include higher inflation and slower growth,” he said. “The size and duration of these effects remain uncertain.”

Focused on inflation

While Powell was circumspect about how the Fed will react to the changes, markets are pricing in an aggressive set of interest rate cuts starting in June, with a rising likelihood that the central bank will slice at least a full percentage point off its key borrowing rate by the end of the year, according to CME Group data.

However, the Fed is charged with keeping inflation anchored with full employment.

Powell stressed that meeting the inflation side of its mandate will require keeping inflation expectations in check, something that might not be easy to do with Trump lobbing tariffs at U.S. trading partners, some of whom already have announced retaliatory measures.

A greater focus on inflation also would be likely to deter the Fed from easing policy until it assesses what longer-term impact tariffs will have on prices. Typically, policymakers view tariffs as just a temporary rise in prices and not a fundamental inflation driver, but the broad nature of Trump’s move could change that perspective.

“While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent,” Powell said. “Avoiding that outcome would depend on keeping longer-term inflation expectations well anchored, on the size of the effects, and on how long it takes for them to pass through fully to prices.”

Core inflation ran at a 2.8% annual rate in February, part of a general moderating pattern that is nonetheless still well above the Fed’s 2% target.

In spite of the elevated anxiety over tariffs, Powell said the economy for now “is still in a good place,” with a solid labor market. However, he mentioned recent consumer surveys showing rising concerns about inflation and dimming expectations for future growth, pointing out that longer-term inflation expectations are still in line with the Fed’s objectives.

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