Interest rates hold steady: What it means for your money and how you can benefit from the Fed’s decision

Donald Trump’s economic policy had hit the world like a ton of bricks, shaking the confidence out of the world’s top financiers and causing businesses to wobble like drunken giraffes.

Rash, seemingly inept decisions to place tariffs on just about every country worth talking about has simply frozen trade across the globe, as business owners try to work out the best way to proceed in a live-or-bust version of ‘Takeshi’s Castle’.

Thankfully, on May 7, 2025, the Federal Reserve opted to hold its current interest rates, opting for a cautious approach amid deepening concerns over inflation and unemployment across the States, no thanks to Trump’s politics.

This decision reflects the central bank’s strategy to “wait and see,” as it monitors the economic impact of recent tariff policies implemented by the Trump administration. Economists widely agree that inflation, which came in at 2.3% in March, is set to be affected by tariffs. Joe Brusuelas, chief economist at RSM US, told CNN that he expects both headline and core inflation to top 4% later this year.

As for what to do with your money, the traditional banks seem to be a solid option for everyday spending like bills and groceries. But if you want to save money for things you don’t need to buy all the time, online high-yield savings accounts are better because they pay more interest.

Right now, some online accounts offer 4% to 4.4%, while big banks like Chase only pay about 0.1%. These online accounts are also FDIC-insured, so your money is safe. Online money market accounts are another good option that also offer high interest.

“The average MMA yield at brick-and-mortar banks is a scant 0.41%, whereas the top-yielding, nationally available MMAs offered by online banks pay 10 times that amount, 4.1% or more. Ten times the return, while still being fully covered by federal deposit insurance and (offering you) access to the money when it is needed,” Greg McBride, Bankrate’s chief financial analyst, told CNN.

How to manage your money, according to the experts

Credit cards: Even if the Fed lowers interest rates, credit card rates will likely stay very high. Right now, the average rate is around 20.12%. If you have credit card debt, look into a 0% balance transfer card, which can give you up to 21 months without interest to help you pay it off faster.

Mortgages: The average 30-year fixed mortgage rate is about 6.76%—a bit lower than last year’s 7.22%. Rates are expected to stay between 6.6% and 7% this summer.

“For those shopping for a home this summer, rates are likely to stay in or around (the 6.6% to 7%) range in the near future. Even a rate cut from the Fed may not send mortgage rates lower, as the Fed doesn’t impact mortgage rates directly the way they do with credit cards,” Schulz said.

Car loans: Buying a car is getting tougher because prices are high and interest rates are steep. In April, a new car loan averaged $41,444 at 7.1% interest, with payments around $744/month. A used car loan averaged $28,855 at 10.9%, with $555/month payments.

“Today’s car shoppers are contending with the difficult duo of elevated vehicle costs and high borrowing rates. Adding to this scenario is the ambiguity surrounding tariff repercussions on vehicle supply and, consequently, their price tags, forcing buyers to navigate an ever-more complicated shopping path”, Joseph Yoon, a consumer insights analyst at Edmunds.com, told CNN.

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