{"id":1235080,"date":"2025-02-26T09:00:00","date_gmt":"2025-02-26T14:00:00","guid":{"rendered":"https:\/\/www.prime-wow.com\/?p=1235080"},"modified":"2025-02-26T09:00:00","modified_gmt":"2025-02-26T14:00:00","slug":"two-reasons-interest-rates-wont-be-dropping-anytime-soon","status":"publish","type":"post","link":"https:\/\/www.prime-wow.com\/?p=1235080","title":{"rendered":"Two Reasons Interest Rates Won\u2019t Be Dropping Anytime Soon"},"content":{"rendered":"
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If you’ve been waiting in earnest for interest rates to drop, I have some bad news: The Federal Reserve has effectively put rate cuts on hold until President Donald Trump and Congress establish a clear policy direction that won’t make inflation even worse. According to the Federal Reserve\u2019s January meeting minutes<\/a>, released this week, this cautious stance is a result of the Fed simply not knowing how the \u201ceconomic effects of potential government policies\u201d might play out.<\/p>\n

While the federal funds rate is designed to set what banks charge each other, it trickles down to everything from mortgages to student loans. If you\u2019re planning on applying for a credit card, a home, or a car loan any time soon, here\u2019s how the Fed’s waiting game will impact you.<\/p>\n

Higher inflation is still a thing<\/h2>\n

Assuming there isn’t a sudden spike in the unemployment rate, Fed officials said<\/a> they would \u201cwant to see further progress on inflation before making additional adjustments to the target range for the federal funds rate.\u201d In the meantime, inflation has proved to be more resilient than hoped, with the numbers from January coming in hotter than expected<\/a>. <\/p>\n

While no rate movement in either direction is the most likely outcome for the time being, there’s a chance that if inflation worsens again, the Fed’s next move would be not a rate cute, but a rate hike.<\/p>\n

Market expectations for interest rate cuts have already declined significantly. The latest CNBC Fed Survey<\/a> showed 65% of respondents predict two rate cuts in 2025, down from 78% in the prior survey. And if the Fed does cut rates this year, the first cut may not come until June or July, according to the CME FedWatch tool<\/a>. In other words, the Fed has adopted a “wait and see” approach\u2014it is unwilling to lower rates amid uncertainty about the new administration’s economic policies. <\/p>\n

Trump’s tariff plans could raise prices even more<\/h2>\n

The biggest contributor to said economic uncertainty is President Trump’s stated plans for tariffs on imports. While earlier announced tariffs on Canada and Mexico are on hold<\/a> (at least for now<\/a>), China is facing new 10% tariffs<\/a>, and additional tariffs on those and other countries<\/a> aren’t out of the realm of possibility.<\/p>\n

The Peterson Institute estimates<\/a> that tariffs on just China, Mexico, and Canada could cost the average American family approximately $1,200 annually\u2014and this estimate doesn’t account for Trump’s broader reciprocal tariff plans. This is because when tariffs drive up the cost of a product being imported, those costs get passed on to the customer.<\/p>\n

Large purchases like automobiles, appliances, and electronics<\/a> are likely to see some of the most noticeable price increases, according to Johnston. These items often rely heavily on global supply chains and imported components. Even products assembled in the United States frequently depend on imported parts, meaning tariffs could affect prices even for “American-made” goods.<\/p>\n

The bottom line<\/h2>\n

If you were hopeful interest rates might drop in the next few months, don’t hold your breath<\/a>. We’ve been battling persistent inflation for years now, and with inflationary pressures from tariffs on the horizon, the Fed appears committed to maintaining higher rates until there’s compelling evidence that inflation is firmly under control. <\/p>\n

But hey, while higher interest rates raise costs for borrowers, they can also mean higher yields for savers\u2014so here’s how you can take advantage of that<\/a>.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

If you’ve been waiting in earnest for interest rates to drop, I have some bad news: The Federal Reserve has effectively put rate cuts on hold until President Donald Trump and Congress establish a clear policy direction that won’t make … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ngg_post_thumbnail":0,"footnotes":""},"categories":[91,110],"tags":[],"class_list":["post-1235080","post","type-post","status-publish","format-standard","hentry","category-lifehacker","category-unfiltered-rss"],"_links":{"self":[{"href":"https:\/\/www.prime-wow.com\/index.php?rest_route=\/wp\/v2\/posts\/1235080","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.prime-wow.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.prime-wow.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.prime-wow.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.prime-wow.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1235080"}],"version-history":[{"count":0,"href":"https:\/\/www.prime-wow.com\/index.php?rest_route=\/wp\/v2\/posts\/1235080\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.prime-wow.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1235080"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.prime-wow.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1235080"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.prime-wow.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1235080"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}