Federal Reserve officials announced their decision to maintain the benchmark rate, a move widely predicted by economists and Wall Street following an uptick in inflation during the first quarter of 2024.
The Fed's statement on Wednesday confirmed that the federal funds rate will remain within the range of 5.25% to 5.5%, a level unchanged since the central bank's July 2023 meeting, marking the highest rate in over two decades.
Fed Chairman Jerome Powell has consistently emphasized the Fed's preference for keeping rates elevated until inflation moderates to around 2% annually, rather than risking premature cuts that could reignite price surges. Despite the series of interest rate hikes by the Fed, inflation has remained persistently high, with March prices increasing by 3.5% compared to the previous year, driven by spikes in housing and gasoline costs.
"The Fed has been clear that this process may take time and individuals should not anticipate rates dropping to zero in the near future," remarked Jacob Channel, senior economist at LendingTree. However, he added, "There is a likelihood of rate cuts later in the year."
Wall Street traders have shifted their expectations, now only anticipating a single rate cut to the Fed's benchmark rate this year. This is a significant change from their initial predictions at the beginning of the year, where they thought the Fed could cut rates up to six times in 2024.
The Fed's statement on Wednesday reiterated that it will not reduce rates "until it has gained greater confidence that inflation is moving sustainably toward 2%."
What does the rate decision mean for your money?
Expect to continue to pay high rates to borrow money, experts say. Mortgage rates are expected to remain above 7% in the near future. Similarly, credit card rates, currently at record highs, are likely to stay elevated.
"Across the board, it's all expensive," one expert mentioned. "The interest rate on a credit card will make the interest rate on a mortgage look minuscule by comparison."
However, on a positive note, savers can expect to find higher-interest savings accounts, with some offering yields above 5%. Certificates of deposit and other savings options may also provide attractive rates, according to banking experts.
