The Fed freezes rates: Your mortgage and loans will remain expensive because of tariffs.

The Federal Reserve (Fed) has decided to keep its benchmark interest rate unchanged in the 4.25% to 4.5% range, a move that will keep mortgage, auto loan, and credit card costs high for millions of Americans. The main reason for this paralysis: the uncertainty generated by President Trump's new trade tariffs, which threaten to reignite inflation.

Washington, D.C. – In a decision that directly impacts the budgets of American households, the Federal Open Market Committee (FOMC) of the Federal Reserve concluded its June meeting by keeping its key interest rate on hold. Although inflation has shown signs of cooling, the central bank finds itself in what one economist has described as an “uncomfortable purgatory,” unable to lower rates for fear that the aggressive new trade tariffs imposed by the Trump administration will trigger a new wave of price increases.

For the average consumer, the message is clear: relief from borrowing costs will have to wait. Thirty-year mortgage rates, hovering around 7%, and credit card rates, exceeding 20%, won't see a break anytime soon.

The Fed's Dilemma: Rates vs. Slowdown

The Federal Reserve faces a classic economic dilemma, but with a modern political twist. On the one hand, data such as the slowdown in hiring and inflation that had returned to levels close to the 2% target would suggest it's time to cut rates to stimulate the economy.

However, the imposition of tariffs of up to 50% on steel and aluminum, and 10% on imports from almost all countries, has radically changed the outlook. The Fed now projects that these tariffs will push up inflation in the coming months, and is reluctant to lower rates in an environment of rising prices.

"Without the threat of tariffs, we would be seeing the Fed cut. We're not in that situation because of the uncertainty and the effects (of tariffs) that we don't yet know." – Diane Swonk, chief economist at KPMG.

The Real Cost of Rates: A $2,000 Hit to Your Household

Beyond the macroeconomic debates, an analysis by Yale University's Budget Lab has quantified the direct and painful impact of the 2025 tariffs on consumers. The findings are alarming:

* Loss of Income: The overall price increase equates to an average income loss of $2,000 per household in 2025.

* Skyrocketing Prices: Consumers will face 33% higher prices for footwear, 28% higher prices for clothing, and 13.6% higher prices for motor vehicles. This equates to an additional cost of $6,500 for an average new car.

* Impact on Employment: The economy is projected to have 394,000 fewer jobs by the end of 2025 due to the impact of the tariffs.

The Fed's Official Projections

The Fed's own economic projections, updated this week, reflect this grim picture. The central bank has had to adjust its forecasts to reflect the new rate environment, painting a picture of lower growth and higher inflation.

Despite this outlook, the Fed remains hopeful of making two rate cuts later this year. However, Fed Chairman Jerome Powell has emphasized that they must be "forward-looking" and take into account the inflation that "will arrive in the coming months."

Meanwhile, the White House continues to pressure the Fed to cut rates, not only for the economy, but also to reduce interest payments on the growing federal debt. This political pressure adds another layer of complexity to the decisions of the central bank, which is mandated to operate independently.

For Americans, it's a wait-and-see situation. Their personal finances are caught in the crossfire between White House trade policy and the Federal Reserve's monetary policy.