Key takeaways

• The Fed decided to hold interest rates steady during its July meeting as inflation eased to 2.7%.
• Strong job growth could signal further economic resilience, making near-term rate cuts less essential.
• High-yield savings and CDs could continue to offer high-interest returns for now.

The Federal held rates steady in July, and new data indicates future cuts could be delayed as inflation cools and job growth holds. 

After months of speculation, the Federal Reserve decided to keep interest rates unchanged in July. This marks the seventh consecutive meeting without a rate change, even though some in the industry expected a rate cut by now.¹ Rather, due in part to recent labor and inflation data, the Fed opted to stay the course through the summer.

This rate decision has several impacts on the average U.S. household. First, interest rates influence everything from mortgages and credit card rates to savings and account interest yields. The Fed’s decision comes at a time when some Americans are balancing cautious optimism with long-term financial planning. 

Fed interest rate changes remain on pause

As markets expected, the Fed opted to keep interest rates steady for now during its July session — and may do so again in August.² The Fed’s preferred inflation data metric was up 2.7% as of June, slightly above its 2% goal.³ And with employment holding at 4.2%, there was one fewer source of urgency to make the kind of interest rate changes that can create wide-reaching economic impacts.⁴

Labor figures tell a supporting story. June’s job report showed 147,000 new positions, beating expectations. Unemployment dipped to 4.1%. Long-term joblessness ticked up, however.⁵  

These conditions may give the Fed a bit of breathing room. The Fed decision may suggest that they do not see specific signs of runaway inflation or economic overheating, prompting them to hold off on changes for now. This meeting featured some unusual internal dissent, however: Two Fed Governors (Michelle Bowman and Christopher Waller) voted to cut rates by 25 basis points, marking the first time since 1993 that multiple governors dissented.⁶ 

What the Fed interest rate decision means for the economy

Markets, as well as voices in Washington, D.C., had hoped for a July rate cut.⁷ But the combination of moderate inflation, robust employment, and persistent price stickiness on consumer goods and homes cooled expectations.

Shelter costs (home building, buying and selling, and rentals) fell by 0.3.% in May.⁸ With core inflation remaining above the Fed’s comfort level, it’s possible that they may be taking a wait-and-see approach. New trade policies and tariffs may also pressure supply chains later this year, which could give the Fed reason to pause before changing rates.⁹

Consumer resilience has stayed strong despite higher-than-hoped for inflation levels. People are spending, particularly on services, even as they get strategic with their spending in categories like apparel and home goods. 

How the Fed’s interest rate hold impacts everyday finances

Elevated interest rates affect borrowers and savers differently. Borrowing in a high-interest environment is more expensive: Average credit card APRs remain above 20%, and new mortgage rates still hover near 7%.¹⁰ For home buyers, this could lead to slower decision-making or holding off on a move until rates decline. And for current homeowners, refinancing a mortgage may have to come later, if interest rates decline.

Savers may benefit from interest rates holding steady. Some banks’ top-yield savings accounts offer between 4.11% and 4.30% interest.¹¹ Rates on Certificate of Deposit (CD) accounts are similarly elevated — some going as high as 4.5% APY on six-month CDs.¹² If these rates hold steady through the summer, savers may see higher yields as well.

Pausing the Fed borrowing appears to have a stabilizing force for the markets. The first quarter of 2025 witnessed volatility, driven in part by tariff talks and declines in the equities market. Investors have regained some confidence, however, as inflation has slowed and rate cuts still remain on the horizon — even if they’re not in the plans right now.

What the Fed is watching for

The Fed may be looking to make data-driven decisions before opting to change interest rates. The next few Consumer Price Index (CPI) and jobs reports, along with wage growth and consumer spending, may shape the timeline for future adjustments.

• Prices rose 2.7% in May, according to the Personal Consumption Expenditures (PCE) report, which the Fed monitors closely.
• Wholesale prices (what businesses pay before retail prices) did not move much in June, but are still growing faster than the Fed may want before pursuing a rate cut.
• Consumer spending decreased slightly in May, but rebounded in June by 0.6%. Retail sales, adjusted for seasonal fluctuations, was up 3.9% year-over-year.

These figures don’t outline a specific economic trajectory. Inflation may be falling, and the economy could be cooling down, but consumers are still interested in paying for goods and services (if with more restraint). If these trends hold through the next few report cycles, it may be possible that rate cuts could come later this year. 

How households are adjusting

Americans are approaching finances with focus. Their emergency savings rates are rising, and the average 401(k) balance grew 1.1% in Q1 despite market volatility. Spending hasn’t stopped, but it’s become more targeted. People are still traveling, going to restaurants, and investing in experiences. They’re just doing it with more intention, and with a keen eye on value.