Latest news with #interestRates
Yahoo
9 hours ago
- Automotive
- Yahoo
How does the Fed interest rate affect car loans?
Key takeaways Decisions made by the Federal Reserve to increase the benchmark rate do not directly impact auto loans but rather the cost for banks to lend. The higher the Fed sets rates, the higher auto loan rates will likely be. The Fed made its third and final cut of 2024 in December, bringing the new target rate to 4.25-4.5 percent. There was no change in the fed funds rate during the June 2025 meeting, and with inflation suspected to increase with the implementation of tariffs, a rate cut may not happen any time soon. Switch Auto Insurance and Save Today! Great Rates and Award-Winning Service The Insurance Savings You Expect Affordable Auto Insurance, Customized for You The Federal Reserve is a complex facet of the American economic system. The Fed determines how much it costs banks to borrow money at its eight or so meetings per year. One of its jobs is setting a benchmark interest rate for short-term consumer lending, which private lenders use to set their own rates. When the federal funds target rate is high, you can expect to pay more for a personal or auto loan. The opposite is also true, with a lower fed funds rate meaning lower average rates on consumer loans. How Fed rates affect auto loans Auto loan rates are dictated by the time of year, the type of vehicle, the borrower's credit score and more. But the Fed sets the benchmark rate on which auto loan lenders base their rates. The choices discussed by the Federal Open Market Committee (FOMC) during Fed meetings are not the exact interest rates consumers will be offered. Rather, they impact the cost for banks to lend to each other. Lenders may change offered rates when the federal funds rate changes because of this. When the Fed raises interest rates, auto loan rates may rise as well, and vice versa. June FOMC meeting The FOMC increased rates a total of 11 times from 2022 to 2023 in an effort to tamp down inflation. After inflation stabilized, the FOMC made three cuts at the end of 2024. The target range dropped to 4.25-4.5 percent. Throughout 2025, including the most recent June meeting, the Fed declined to change the fed funds rate, so it remains the same. However, this number does not control auto rates directly. Auto loan rates are primarily tied to the prime rate. The 11 rate increases since the beginning of 2022 mean that vehicle financing cost more money, but since then, rate decreases have meant a lower average auto loan rate through the end of 2024 and into 2025. Why Fed meetings are important Fed meetings are important because they allow anyone to have a transparent look into the economy — more specifically, the way interest rates change and are expected to shift. If the Fed announces that it is raising interest rates, you can expect to encounter more expensive loans or see interest rates rise on any variable-rate loans you already have. Learn more: Bankrate's Federal reserve hub While the Federal Reserve doesn't directly affect auto loan rates, what they do impact is the price of money. If the Fed is lowering rates, then the price of money is going down and, all else equal, borrowers can expect to see lower rates in the months ahead. The opposite is true as well, with the price of credit rising when the Fed increases benchmark interest rates. Greg McBride, Chief Financial Analyst, Bankrate The Federal Reserve has a direct line to your wallet. Every time the Fed meets to decide what to do with interest rates, its decisions ultimately impact how much you end up paying to finance big-ticket purchases, like homes and cars. Many Americans have been waiting for relief — on both the inflation and the interest rate front — but one won't happen without the other. Rates are unlikely to fall far enough, and fast enough, to offer borrowers major relief for the foreseeable future. Until then, it's the Americans who keep their credit score in tip-top shape, pay down debt, pay their bills on time and compare offers from multiple lenders who will find the best deals in a pricey borrowing environment. Sarah Foster, U.S. Economy Reporter and Analyst, Bankrate Caret Left Icon Caret Right Icon How to prepare for future Fed rate changes Preparation is the key to saving money. To be best prepared, educate yourself on the current federal funds rate and how shifting rates may impact your wallet. The federal funds rate and auto loan rates aren't the same, but a domino effect reaches the lenders, which then affects your rates. Although the current federal funds rate dictates the general range of auto loan rates available, your credit score is the primary factor in determining the amount you pay. To receive a loan with the most favorable terms, you must have a prime credit score, typically 660 and above, and good credit history. The federal funds rate is out of your control, but you can improve your credit score to prepare for future vehicle financing. Learn more: If you borrowed when interest rates were high, consider refinancing your auto loan Next steps When the Fed adjusts rates, available auto loan rates may also change. Although the Fed's decisions impact your auto loan, the rate you will receive is primarily determined by your financial history. Regardless of how the federal funds rate changes, set yourself up to save for the best auto loan rate by working to improve your credit score and finances. It's also good to keep up to date on current loan rates before applying for a new auto loan. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Wall Street Journal
10-07-2025
- Business
- Wall Street Journal
Hong Kong Takes Another Currency Hit With a Smile
Danger, Will Robinson: The Hong Kong dollar is in the news again. The Hong Kong Monetary Authority in recent months has intervened at both the top and the bottom ranges of the Hong Kong dollar's fixed exchange-rate band with the U.S. dollar, causing big swings in interest rates. Cue chatter in the financial press about whether Hong Kong's peg to the greenback could be scrapped under market pressure.
Bloomberg
10-07-2025
- Business
- Bloomberg
African Central Banks Weigh Policy Options Amid Trump's Tariffs
Key African economies are set to stake out different approaches to interest rates in the coming weeks as they gauge the impact of US President Donald Trump's new tariff proposals and their domestic influences on their economies and inflation. 'Upcoming monetary policy decisions across African central banks will be shaped by a common theme: the tension between easing inflation and persistent structural vulnerabilities,' according to Angelika Goliger, EY Africa chief economist. 'While headline inflation is receding in several economies, the pace and scope of monetary easing will vary significantly, reflecting domestic political dynamics, external risks, and reform agendas.'
Bloomberg
10-07-2025
- Business
- Bloomberg
The RBA Rate Cut That Didn't Happen, And What Comes Next
Never miss an episode. Follow The Bloomberg Australia Podcast today. The Reserve Bank of Australia shocked markets this week by keeping interest rates on hold at 3.85%, despite widespread expectations for a third cut in five months. That decision left millions of mortgage holders disappointed and raised new questions about the central bank's strategy as inflation continues to ease. This week on the Bloomberg Australia Podcast, Chris Bourke speaks with economy reporter Swati Pandey about why markets misread the RBA, what Governor Michele Bullock's signals mean for future moves, and what could prompt the next cut. They also unpack the impact on housing and how global risks like President Trump's tariff threats are complicating the outlook. Read more: Further listening: Listen and follow The Bloomberg Australia Podcast on Apple, Spotify, on YouTube, or wherever you get your podcasts. Terminal clients: Run {NSUB AUPOD } on your desktop to subscribe.
Reuters
10-07-2025
- Business
- Reuters
South Korea holds rates steady amid tariff, household debt concerns
SEOUL, July 10 (Reuters) - South Korea's central bank held interest rates steady on Thursday, as policymakers steered a cautious path amid concerns about financial stability risks stemming from rising household debt and economic pressure from U.S. tariffs. The Bank of Korea's seven-member monetary policy board voted to keep its benchmark interest rate (KROCRT=ECI), opens new tab unchanged at 2.50%, an outcome expected by all 33 economists in a Reuters poll. Concerns of financial stability risks in Asia's fourth-largest economy have grown in recent months, driven by home prices and household debt rising sharply on lower interest rates, prompting policymakers to introduce stricter mortgage rules. Economists expect the central bank, which has lowered interest rates by a cumulative 100 basis points in the current easing cycle that started in October, to deliver at least one more rate cut of 25 basis points this year to underpin the economic recovery. The government last week adopted a second supplementary budget for the year with a cash handout scheme to boost domestic demand, as President Lee Jae Myung, who took office on June 4, prioritises shoring up an economy grappling with trade risks and tepid consumption. Earlier this week, U.S. President Donald Trump ramped up the trade war he launched this year, telling partners, from powerhouse exporters such as Japan and South Korea to minor players, that they will face high tariffs from August 1. Governor Rhee Chang-yong will hold a press conference at 0210 GMT, which will be livestreamed via YouTube.
