Fed halts interest rate increases — for now

Jerome Powell holds news conference after interest rate announcement Photo by Alex Wong/Getty Images News/Getty Images Jerome Powell holds news conference after interest rate announcement Image:

Editorial Note: Credit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors' opinions. Our marketing partners don’t review, approve or endorse our editorial content. It’s accurate to the best of our knowledge when it’s posted.
Advertiser Disclosure

We think it's important for you to understand how we make money. It's pretty simple, actually. The offers for financial products you see on our platform come from companies who pay us. The money we make helps us give you access to free credit scores and reports and helps us create our other great tools and educational materials.

Compensation may factor into how and where products appear on our platform (and in what order). But since we generally make money when you find an offer you like and get, we try to show you offers we think are a good match for you. That's why we provide features like your Approval Odds and savings estimates.

Of course, the offers on our platform don't represent all financial products out there, but our goal is to show you as many great options as we can.

Federal Reserve Chairman Jerome Powell has announced the agency will halt interest rate hikes — a reversal of earlier signals.

The Federal Reserve had indicated in December that it would continue interest rate hikes well into 2019. But there were signs earlier this month that the Fed was reconsidering, according to the Wall Street Journal — and at its first meeting of 2019 on Wednesday, the Fed moved to keep rates between 2.25% to 2.5% (the same level they landed on in December).

Following Wednesday’s meeting, the Fed issued a statement explaining that it would play by ear whether to raise interest rates in the future — leaving the central bank room to assess the overall health of the U.S. economy before raising rates again.

The latest interest rate news from the Fed was welcomed by markets. It’s also probably good news for consumers — variable interest rates on many credit cards should hold steady for now, and the market for auto loans and mortgages should be no less inviting.

Powell’s explanation for the Fed’s decision wasn’t quite as sunny, though. He cited slowing global economic growth along with growing uncertainty in domestic policy as reasons to adopt a more cautious approach to interest rates.

Want to know more?

What’s the background?

The Federal Reserve is America’s central bank tasked with setting monetary policy with the broad goal of promoting employment, stabilizing prices and keeping inflation in check. Every six weeks or so, the central bank’s Federal Open Market Committee meets to discuss fiscal policy including any possible changes to interest rates.

Since 2015, the Fed has engaged in a policy of steady rate increases, which has led to criticism by some including President Trump, who has repeatedly urged the Fed to halt rate increases.

During its December meeting the Fed once again raised rates. At the time, most committee members forecast at least two more rate hikes in 2019.

Why does this matter?

The Fed’s turnaround decision to halt interest rate increases and adopt a more “wait and see” approach to future rate hikes was hailed by markets across the globe, and was welcomed by market observers and U.S. politicians on both sides of the aisle.

However, news of a halt to rate hikes isn’t necessarily all positive — it reflects Powell’s concerns that things like slower growth, trade disputes and the risk of another government shutdown are putting significant pressure on the economy.

How could this impact you?

In the short term, consumers may see variable APRs for credit cards stay at current levels, rather than increase — which could mean interest payments won’t cost you any more than they do now. On the flip side, interest rates on savings accounts and certificates of deposit may also stay at current levels, so you probably won’t see any greater return on money invested in these types of accounts.

What’s next?

When it comes to interest rates, the Fed’s holding pattern is expected to stick at least through mid-year. What happens the rest of the year will likely depend upon how the overall health of the U.S. economy develops. Various factors have some predicting a recession by the end of 2020.

If you’d like to stay on top of the latest Fed news, you can follow its online meeting calendar and statement releases here.