What's next for US interest rates?

The Federal Reserve left interest rates unchanged once again at its June meeting, marking the seventh consecutive time it has done so. For now, that leaves the central bank's benchmark interest rate between 5.25% and 5.50%, where it has remained since July 2023, and which marks its highest level in 23 years.

At its June meeting, the Fed also revised its earlier plans to make multiple rate cuts throughout the year. Now, it plans to make just one cut before the end of the year.

What will the Fed do next?

Fed officials have "predicted just one cut in 2024, down from a forecast for three previously," said The New York Times, though Federal Reserve Chair Jerome Powell suggested that the forecast is not a firm plan. Rather, Powell indicated the decision "hinges on inflation slowing, but that rate cuts could also come if the job market falls apart unexpectedly."

In 2025, however, rate cuts could start coming. The Fed's Summary of Economic Projections, released at its June meeting, "shows four cuts penciled in for next year, with the benchmark rate expected to dip to about 4.1% by the end of 2025," said CBS News.

"Rate cuts that might have taken place this year, take place next year," Powell said. "There are fewer rate cuts in the median this year, but one more next year. By year-end 2025 and 2026, you are almost exactly where you would have been — it's just later."

When is the next interest rate decision?

The next Federal Reserve meeting is scheduled for July 30-31. It's unlikely any changes to rates will come that soon though — "July is probably too soon for the Fed to see enough progress on inflation," said The Washington Post. Its following meeting in September still "could be cutting it close, analysts say," while "the November meeting will be during the week of the presidential election," which leaves its December meeting for a possible cut.

How do interest rates affect the economy?

The Fed uses interest rates "like a gas pedal and a brake pedal," Forbes said. Lowering rates stimulates the economy; raising rates slows the economy down. The agency doesn't actually set the funds rate — banks do that — but "the Fed assumes that banks will use it as a floor in their own lending," Forbes added.

Rate changes usually take "at least 12 months" to have "widespread economic impact," Investopedia said. But the stock market reacts immediately. For example, when Fed chairman Jerome Powell signaled last year that further interest rate hikes were likely, the market went into a bit of a tailspin. The major indexes each fell more than 1%. Beyond stocks selling off, "Treasury yields rose and the dollar extended again after Powell's comments," said Reuters.

What do rate hikes mean for your wallet?

As Kiplinger said, "rate hikes are a blessing and a curse for consumers." When the Fed raises rates, consumers will pay higher interest rates on debt like credit cards, home equity lines of credit, and private student loans. However, on the flip side, savings rates also tend to increase. In the face of rate hikes, Kiplinger offers the following pieces of advice:

• Pay off any debt. Aim to pay off your debt before interest rates get any higher. While the impact might feel gradual initially, continued increases ultimately can make paying off debt more challenging.

• Lock in rates if you can. For those with a home equity line of credit, consider locking in a lower rate on all of a portion of your balance.

• Take advantage of top savings rates. Finally, take advantage of increasing savings rates. Kiplinger advises consumers that they'll usually find the best rates at online banks or other online financial institutions, including the ones in the table below.