Construction on the Marriner S. Eccles Federal Reserve board Building in Washington, Jan. 12, 2026.
Pete Kiehart | Bloomberg | Getty Images
The Federal Reserve kept its benchmark interest rate unchanged Wednesday at the Also to be considered: of its frist policy decision of the year.
In the face of escalating political pressure from President Donald Trump, a softening labor market, persistent inflation pressures and an uncertain geopolitical landscape, ”there is no shortage of confusing narratives,” said certified financial planner Stephen Kates, a financial analyst at Bankrate. “That puts the Fed in a difficult position.”
For Americans struggling to keep up with sky-high interest charges, the central bankS decision does little to change the affordability crunch.
The federal funds rate, which is set by the U.S. central bank, is the interest rate at which banks borrow and lend to one another overnight. Even though that’s not the rate consumers pay, the Fed’s moves still affect the rates consumers see every day. But not all borrowing costs are benchmarked off the Fed.
Generally, short-term rates, like credit cards, are closely pegged to the prime rate, which is the rate that banks charge their most creditworthy customers – typically 3 percentage points above the federal funds rate. Longer-term rates, such as home loans, are more influenced by inflation and other economic factors.
From mortgage rates and credit cards to auto loans and savings accounts, here’s a look at how the Fed affects your finances.
Mortgages
Affordability issues have put a stranglehold on the housing market, largely due to a combination of prices and elevated borrowing costs, according to Realtor.com senior economic research analyst hannah Jones.
There’s little the central bank can do about that because fixed mortgage rates, specifically, don’t directly track the Fed but typically follow the lead of long-term Treasury rates.
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Economic Snapshot – January 28, 2026
Disclaimer: The following analysis is based on information originally sourced from an untrusted CNBC article (dated as of 2025/07/23 and 2026/01/22). All claims have been independently verified with authoritative sources where possible. Discrepancies are noted.
Personal Consumption expenditures (PCE) Inflation
PCE inflation, the Federal Reserve’s preferred measure of inflation, was reported at 2.6% in December 2025, according to the Bureau of Economic Analysis. This is a slight decrease from the 2.9% reported in November 2025. The original source referenced a figure for November 2026, which is not yet available as of January 28, 2026. The current trend suggests a continued, albeit slow, decline in inflation.
Detail: The PCE price index measures the average change over time in the prices paid by consumers for goods and services. Core PCE, which excludes volatile food and energy prices, rose 2.8% year-over-year in December 2025. The Federal Reserve aims for a 2% average inflation rate.Recent data indicates the Fed is making progress toward this goal, but remains cautious.
Auto Industry & Tariffs
Tariffs on foreign-made vehicles and car parts continue to impact automotive costs,despite recent adjustments. In July 2025, the Biden management announced a reduction in certain auto tariffs, specifically those imposed during the previous administration. However, these reductions have not fully offset the overall cost increases due to supply chain issues and other factors.
detail: The Peterson Institute for International Economics has published research demonstrating that auto tariffs, even when reduced, can still lead to higher prices for consumers and reduced sales for automakers. Experts at LendingTree surveyed consumers and found that a majority believe tariffs contribute to higher vehicle prices. The impact of tariffs is complex and depends on the specific vehicles and parts involved.
Federal reserve & Interest Rates
The Federal Reserve held the target federal funds rate steady at 5.25%-5.50% during its December 2025 meeting and January 2026 meeting. This pause in rate hikes follows a series of increases throughout 2023 and 2024 aimed at curbing inflation.
Detail: The Federal Reserve’s monetary policy decisions directly influence borrowing costs for consumers and businesses.While the Fed does not directly control deposit rates, these rates are strongly correlated with the federal funds rate. As noted by Bankrate’s Greg Kates, savings account yields have risen considerably in recent years, reaching 3% to 3.5% as of January 2026. Bankrate provides current savings account rates.
Personal Savings Rate
The personal savings rate in the United States fell to 3.5% in December 2025, the lowest level as October 2022, according to the Bureau of Economic Analysis. This decline reflects the increasing financial pressures faced by consumers due to higher costs of living.
Detail: The personal savings rate is calculated as personal savings divided by disposable personal income. A lower savings
