Will the Fed Hold or Cut? Here’s What to Do With Your Money Either Way

All eyes are on the Federal Reserve this week as it weighs its next move on interest rates. With inflation gradually cooling and new economic risks on the horizon—including fresh tariff threats—the Fed is expected to hold its benchmark interest rate steady at 5.25% to 5.5%, continuing its “wait-and-see” strategy.

But just because the Fed is sitting tight doesn’t mean you should. Whether you’re borrowing, saving, or planning a major purchase, understanding the central bank’s current stance can help you make smarter financial moves.

Why the Fed is holding steady

The Fed’s aggressive rate hikes in 2022 and 2023 were aimed at curbing the worst inflation in decades. Now, with inflation trending downward (but still not quite at the Fed’s 2% target), policymakers are in a holding pattern.

New uncertainties from the Trump administration complicate matters—most notably, the economic fallout from the latest round of proposed tariffs, which could re-ignite inflationary pressures or slow growth. In this environment, the Fed is unlikely to make bold moves.

“They don’t want to cut too soon and risk a rebound in inflation,” says Diane Swonk, chief economist at KPMG. “But they’re also aware that keeping rates high for too long can cause collateral damage.”

Borrowing costs: Still painful, but predictable

For consumers, the Fed’s pause means borrowing costs remain elevated. Credit card APRs are hovering around 20% on average. HELOCs (home equity lines of credit), which move in step with the Fed’s rate, are still averaging just under 8%.

Mortgage borrowers won’t see immediate relief either. The average 30-year fixed mortgage rate is approaching 7%, according to Freddie Mac—well above the sub-3% rates homeowners enjoyed just a few years ago.

So what’s a would-be borrower to do?

• Homeowners with equity might consider locking in a fixed-rate home equity loan rather than a variable-rate HELOC.
• First-time homebuyers may benefit from getting pre-approved now but waiting to lock in a rate if cuts are expected later this year.

Savers: Your window of opportunity may be closing

There’s good news if you’re on the other side of the interest rate equation. Thanks to the Fed’s high-rate posture, savings yields are still strong. Online banks are offering 4.5% to 5% on high-yield savings accounts and certificates of deposit (CDs).

But if the Fed does cut later this year—as some analysts predict—those attractive rates could fade.

“Now is a great time to park your emergency fund in a high-yield account or lock in a 12-month CD,” says Greg McBride, chief financial analyst at Bankrate.

The bigger picture: What the Fed is watching

At his post-meeting press conference, Fed Chair Jerome Powell is expected to reiterate the need for “data dependence.” That means the Fed isn’t committing to any particular path—it’s watching inflation, jobs, GDP, and global events to guide its decisions.

Still, markets are pricing in one or two potential rate cuts before the end of 2025, especially if inflation continues to moderate.

Consumers don’t need to hang on every Fed word, but it helps to understand the broader signals:

• If you’re borrowing, we’re likely still in a “high for longer” world—so budget accordingly.
• If you’re saving, enjoy the returns now, but don’t assume they’ll last forever.
• If you’re investing, expect continued market volatility as investors try to read between the Fed’s lines.

The bottom line

The Fed may likely be pausing, but your financial life isn’t. In today’s high-rate environment, being proactive—whether that means refinancing debt, maximizing savings yields, or timing a home equity move—can make a real difference.

Staying informed is your best defense. And in the Fed’s “wait-and-see” economy, smart consumers don’t wait—they plan.