Personal Finance
How the Fed rate cut will affect your finances
U.S. Federal Reserve Chair Jerome Powell speaks during a press conference, following the issuance of the Federal Open Market Committee’s statement on interest rate policy, in Washington, D.C., U.S., Sept. 17, 2025.
Elizabeth Frantz | Reuters
The Federal Reserve cut borrowing costs for the second time in a row on Wednesday.
Lowering the federal funds rate by a quarter point puts that benchmark in a range between 3.75%-4.00%. The decision comes amid intense pressure from President Donald Trump, who has repeatedly called on Fed Chair Jerome Powell to drastically lower rates, arguing that would make it easier for businesses and consumers to borrow and boost the economy.
The federal funds rate, which is set by the Federal Open Market Committee, is the interest rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves have a ripple effect on many types of consumer products.
For Americans who are stretched thin, this latest move could bring some relief from high borrowing costs, according to Mark Zandi, chief economist at Moody’s. “Their standard of living has flatlined, and a lot of people are uncomfortable with that,” Zandi said. “Many are borrowing money to supplement their income, and now they are paying interest on that debt.”
Many shorter-term consumer rates are closely pegged to the prime rate, which is the rate that banks set and extend to their most creditworthy customers — typically 3 percentage points higher than the federal funds rate. Longer-term rates are also influenced by inflation and other economic factors.
From credit cards and car loans to mortgage rates, student debt and savings accounts, here’s a look at how the central bank’s policy could impact the rates you see.
Credit cards
Credit cards are one of the main sources of unsecured borrowing, and 60% of credit card users carry debt from month to month, according to a March report by the Federal Reserve Bank of New York.
But credit card rates are currently near an all-time high, averaging more than 20%, according to Bankrate.
Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark. When the Fed lowers rates, the prime rate also comes down and the interest rate on your credit card debt could adjust within a billing cycle or two. Yet even then, credit card APRs will still be at extremely high levels.
Damircudic | E+ | Getty Images
When the Fed cut rates in the second half of 2024, lowering its benchmark by a full point by December, the average credit card rate fell by only 0.23% over the same period, an analysis by CardRatings found.
“A quarter-point rate cut is good, but it doesn’t really change a lot for people carrying a balance on their credit card,” said Stephen Kates, a financial analyst at Bankrate.
When it comes to savings on interest charges, “we are talking about dollars per month,” Kates said. “That’s not nothing, but it’s also not a lot.”
For example, if you have $7,000 in credit card debt on a card with a 24.19% interest rate and pay $250 per month on that balance, lowering the APR by a quarter-point would save about $61 over the lifetime of the loan, according to calculations by Matt Schulz, LendingTree’s chief credit analyst.
Mortgages
Although mortgages make up the lion’s share of consumer debt, those longer-term loans are less impacted by the Fed. Both 15- and 30-year mortgage rates are fixed for the life of the loan, so most homeowners won’t be immediately affected by a rate cut.
Mortgages are also more closely tied to Treasury yields and the economy. Still, homebuyers could benefit if the expectation of future cuts puts downward pressure on mortgage rates.
“This presents a tangible opportunity for consumers,” said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion.
For example, with another 25-basis-point reduction, a new home buyer securing a $350,000 mortgage at a 6.75% interest rate could potentially see their monthly payments fall by nearly $150, according to Raneri. “Over time, such savings can significantly ease household budget pressures,” she said.
Other home loans are more closely tied to the Fed’s moves. Adjustable-rate mortgages, or ARMs, and home equity lines of credit, or HELOCs, are pegged to the prime rate. Most ARMs adjust once a year, but a HELOC adjusts right away.
Auto loans
Beyond mortgages and credit card debt, auto loans also account for a significant share of household expenses. But the interest rate is only one factor: High prices and Trump’s tariffs have worsened the affordability equation for car shoppers.
Since auto loan rates, like most mortgages, are fixed for the life of the loan, experts say potential car buyers could mostly benefit if borrowing costs come down in the future.
“While another 25-basis-point rate cut may not drastically lower monthly payments in today’s high-rate, high-price environment, it could help lift consumer confidence,” said Joseph Yoon, Edmunds’ consumer insights analyst.
Salesman Walter Silva (R) helps Alexis Lechanet shop for a Ford vehicle at Metro Ford on May 6, 2025 in Miami, Florida.
Joe Raedle | Getty Images
“More importantly, it may signal that lenders and automakers are preparing to introduce additional financing incentives as we head into the holiday season,” he said. “For many shoppers who’ve been waiting for the right deal, this could be the moment when more attractive offers finally start to appear.”
Student loans
Federal student loan rates are also fixed. The rate for new loans only resets once a year on July 1, so most borrowers won’t be immediately affected by a rate cut.
Eventually, as rates fall, borrowers with fixed-rate private student loans may be able to refinance into a less expensive loan, according to higher education expert Mark Kantrowitz.
However, refinancing a federal loan into a private student loan will forgo some of the “superior benefits” of federal student loans, he said, such as better deferments and forbearances, as well as the income-driven repayment plans, loan forgiveness and discharge options that exist for now. Trump’s “big beautiful bill” will phase out some of those repayment plans in 2028.
Also, some private loans have a variable rate tied to the Treasury bill or other benchmarks, which means borrowers with variable-rate private student loans may automatically get a lower interest rate in line with the Fed’s move, Kantrowitz said.
Savings rates
For savers, it’s more important to take matters into your own hands now that the Fed is on a rate-cutting path. While the central bank has no direct influence on deposit rates, the yields tend to be correlated with changes in the target federal funds rate.
“Yields on high-interest savings accounts and CDs are only going to keep dropping,” said LendingTree’s Schulz. “It is likely time to act to lock in today’s high rates.”
For now, top-yielding online savings accounts and one-year certificate of deposit rates pay more than 4%, according to Bankrate, still above the rate of inflation.
The Federal Reserve held interest rates steady at the conclusion of its policy meeting on Wednesday.
In what could be Jerome Powell’s last as chair before President Donald Trump’s yet-to-be-confirmed nominee Kevin Warsh takes the helm, central bankers maintained the federal funds rate in a target range of 3.5% to 3.75%.
Inflation has surged since the war with Iran began, leaving policymakers with limited room to act, according to Sean Snaith, the director of the University of Central Florida’s Institute for Economic Forecasting. “We’re in a kind of suspended animation — between Iran and the Fed transition,” Snaith said.
Before the oil shock, inflation was holding above the Fed’s 2% target but not worsening. Now the jump in energy costs could have longer-term inflationary effects, economists say.
For Americans struggling in the face of higher gas prices and overall affordability challenges, the central bank’s decision to keep interest rates unchanged does little to ease budgetary pressures. “The cavalry isn’t coming anytime soon,” Snaith said.
How the Fed decision impacts you
The Fed’s benchmark sets what banks charge each other for overnight lending, but also has a trickle-down effect on many consumer borrowing and savings rates.
Short-term rates are more closely pegged to the prime rate, which is typically 3 percentage points above the federal funds rate. Longer-term rates, such as home loans, are more influenced by inflation and other economic factors.
Credit cards
Most credit cards have a short-term rate, so they track the Fed’s benchmark.
After the Fed cut rates three times in the second half of 2025, the average annual percentage rate has stayed just under 20%, according to Bankrate.
“Without Fed rate cuts, there’s not much reason to expect meaningful declines anytime soon, so carrying a balance will remain very expensive,” said Matt Schulz, chief credit analyst at LendingTree.
Mortgage rates
Fixed mortgage rates, on the other hand, don’t directly track the Fed but typically follow the lead of long-term Treasury rates.
Concerns about how the Iran war will impact the U.S. economy have already pushed the average rate for a 30-year, fixed-rate mortgage up to 6.38% as of Tuesday, from 5.99% at the end of February, according to Mortgage News Daily.
That leaves homeowners with existing low mortgage rates “feeling stuck,” said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion. “Mortgages, more than any other credit type, work on a churn,” she said, referring to how a dip in rates can boost borrowing activity.
Student loans
Federal student loan rates are also fixed and based in part on the 10-year Treasury note, so most borrowers are somewhat shielded from Fed moves and recent economic uncertainty.
Current interest rates on undergraduate federal student loans made through June 30 are 6.39%, according to the U.S. Department of Education. Interest rates for the upcoming school year will be based in part on the May auction of the 10-year note.
Car loans
Auto loan rates are tied to several factors, including the Fed’s benchmark. Because financing costs remain elevated, new car buyers are taking on longer loans to keep their monthly payments manageable, according to the latest data from Edmunds.
Even so, with the rate on a five-year new car loan near 7%, the average monthly payment on a new car rose to $773 in the first quarter of 2026, an all-time high.
“Car buyers are in a tough spot right now because they’re getting squeezed from both ends: high sticker prices and high interest rates, with neither showing any signs of letting up,” said Joseph Yoon, consumer insights analyst at Edmunds.
“Until the rate picture shifts, buyers will keep stretching loan terms to make payments work, which only adds to the total cost of ownership down the road,” Yoon said.
Savings rates
While the Fed has no direct influence on deposit rates, the yields tend to be correlated with changes in the target federal funds rate. So, although rates on certificates of deposit and high-yield savings accounts have fallen from recent highs, they are holding above the annual rate of inflation.
For now, top-yielding online savings accounts and one-year CD rates pay around 4%, according to Bankrate.
“Yields on high-yield savings accounts and certificates of deposit are down from their peaks of a few years ago, but they’re still strong compared to what we’ve seen for most of the past decade,” Schulz said.
Milan Markovic | E+ | Getty Images
The average tax refund is 11.2% higher this season, compared with about the same period in 2025, according to the latest IRS filing data.
As of April 10, the average refund amount for individual filers was $3,397, up from $3,055 about one year ago, the IRS reported on Friday.
The IRS data reflects about 114 million individual returns received, out of about 164 million expected through Tax Day. Next week’s filing update is expected to include data through the April 15 deadline.
President Donald Trump‘s 2025 legislation, rebranded to the “working families tax cuts,” was a key talking point for Republicans on Tax Day.
With the November midterm elections approaching and Republicans defending slim majorities in Congress, many GOP lawmakers have highlighted Trump’s tax breaks and higher average refunds.
Meanwhile, affordability has been top of mind for many Americans amid rising costs of gas, electricity, food and other living expenses.
For filers who expected a refund this season, nearly one-quarter, or 23%, planned to use the funds to pay down credit card debt, and the same share said they would save the payment, according to the CNBC and SurveyMonkey Quarterly Money Survey, released in April. It polled 3,494 U.S. adults at the end of March.
Who benefited from Trump’s ‘big beautiful bill’
“It’s been a great tax season for the American people,” many of whom have benefited from Trump’s tax breaks, Treasury Secretary Scott Bessent said during a White House press briefing on Wednesday.
More than 53 million filers claimed at least one of Trump’s “signature new tax cuts” — the deductions for tip income, overtime earnings, seniors and auto loan interest — the Department of the Treasury also announced on Wednesday.
Those filers, who claimed the deductions on Schedule 1-A, have seen an average tax cut of over $800, according to the Treasury. Tax cuts can trigger a higher refund or reduce taxes owed, depending on the filer’s situation.
Some filers who itemize tax breaks have also seen benefits from the bigger federal deduction limit for state and local taxes, known as SALT. Trump’s legislation raised that cap to $40,000, up from $10,000, for 2025.
The latest SALT deduction limit change is expected to primarily benefit higher earners, according to a May 2025 analysis of various proposals from the Tax Foundation.
The Treasury has not released data on how many filers have claimed the SALT deduction during the 2026 filing season.
Traders work at the New York Stock Exchange on April 16, 2026.
NYSE
U.S. stocks climbed to record highs on Thursday against a backdrop of war, an oil supply shock and economic forecasts warning of stunted growth amid a protracted conflict.
Many investors may be thinking: Why?
Largely, it’s because the stock market is a barometer of what investors think will happen in the future, rather than an assessment of the present day, according to economists and market analysts.
Investors are essentially shrugging off the Middle East conflict as a blip that will be resolved relatively quickly, they said.
“The stock market isn’t trying to price what’s happening today,” said Joe Seydl, a senior markets economist at J.P. Morgan Private Bank. “The stock market is always trying to price what the world is going to look like six to 12 months from now.”
Why stocks have been ‘resilient’
The S&P 500, a U.S. stock index, fell about 8% in the initial weeks of the Iran war, from the start of the conflict on Feb. 28 to a recent low on March 30.
But stocks have rebounded since then, erasing all losses since the beginning of the war. The S&P 500 closed at an all-time high on Thursday — about 11% higher than its nadir at the end of March. That followed a record close on Wednesday.
“The market has remained very resilient in the face of the war and has rallied strongly on the prospect that it will be resolved,” said Mark Zandi, chief economist at Moody’s.
A ship waits to pass through the Strait of Hormuz following the two-week temporary ceasefire between the US and Iran, which is conditional on the opening of the strait, in Oman on April 8, 2026.
Shady Alassar | Anadolu | Getty Images
And while investors cheered the possibility of a diplomatic off-ramp to the conflict, the temporary ceasefire has appeared tenuous, with the U.S. and Iran each accusing the other of breaking the agreement.
Nations haven’t been able to reach a peace deal ahead of the ceasefire’s end. Vice President JD Vance said U.S. officials left peace talks in Pakistan over the weekend after the Iranian delegation refused to agree to American demands not to develop a nuclear weapon.
The markets ‘have memory’
Ultimately, the stock market is signaling a collective belief that tensions will ratchet down, the war will end in the near term and oil flows through the Strait of Hormuz will normalize, economists said.
That’s largely because investors have been conditioned to believe that President Donald Trump will back off if the economic pain becomes too intense, economists said — the so-called “TACO” trade, shorthand for “Trump always chickens out.”
“Investors strongly believe — and have been conditioned to believe — he’s going to stand down, find a way to pivot, declare victory and move on,” Zandi said.
Trump has pushed back on the notion of backing down, framing his brinkmanship as a savvy negotiating tactic.
Economists pointed to a recent example of this dynamic: in April 2025 during so-called liberation day, when the Trump administration levied a host of tariffs on U.S. trading partners.
Within days — after the stock market had cratered more than 12% — Trump announced a 90-day pause on those tariffs. Stocks then saw one of their biggest daily rallies in history following Trump’s reversal.
Investors remember that Trump often de-escalates geopolitical shocks — which is why they’ve seized on positive headlines that hint at progress in peace talks, for example, Seydl said.
“The markets have memory,” Seydl said.
AI stocks and the ‘tech boom’
Traders celebrating at the New York Stock Exchange on April 15, 2026, as the S&P 500 closed above the 7,000 level for the first time.
NYSE
There are other factors underpinning market resilience during wartime, economists said.
One is the investors’ enthusiasm for artificial intelligence and technology stocks, which account for almost half of the S&P 500’s market capitalization, Zandi said.
“Those stocks run on their own dynamic independent of anything, including the war in Iran,” Zandi said. “I think we would have been down a lot more and it would have been harder for us to recover had it not been for the very, very optimistic perspectives on AI.”
We’re in the middle of a “tech boom” — and investors are likely to remain optimistic until they think the tech cycle has run its course, Seydl said.
More broadly, stock investors are essentially making a bet on the future earnings growth of a company — and the earnings backdrop has been “pretty solid,” Seydl said.
Consumer spending appears to be stable, for example, economists said. And companies are getting a boost to their after-tax earnings from the GOP’s so-called “big beautiful bill,” which, among other things, made it easier to write off investments upfront and therefore reduce their tax liability, Zandi said.
Going forward
Experts said there will be an economic hit from the Iran war, though.
“Despite the recent news of a temporary ceasefire, some damage is already done, and the downside risks remain elevated,” Pierre-Olivier Gourinchas, director of research at the International Monetary Fund, wrote Tuesday.
A protracted conflict risks deep and global economic pain, he wrote.
Even if the conflict is short-lived — as the broad market expects — stocks are unlikely to march much higher until it’s clear the U.S. is on the other side of the war and its economic fallout, Zandi said.
If investors are incorrect, and President Trump doesn’t back down or quickly extricate the U.S. from the war, the stock market may see a “full-blown correction” or worse, Zandi said. A stock market correction is a decline of at least 10% from recent highs.
“Everyone thinks they know what the script is,” Zandi said. “Now they just need to follow the script. If they don’t, the market will have some real problems.”
The uncertainty provides yet another example of why the average investor with a long time horizon should stick to their investment plan and ignore the noise, experts said.
“Trying to time the market is very difficult if not impossible for the average investor,” Seydl said. “It’s better to take a long-term perspective and ride out bouts of volatility.”
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