Business
What the Fed’s Rate Decision Means for Loans, Credit Cards, Mortgages and More
The Federal Reserve is expected to keep its key rate steady on Wednesday, after a series of cuts that lowered rates by a full percentage point last year.
That means consumers looking to borrow are likely to have to wait a bit longer for better deals on many loans, but savers will benefit from steadier yields on savings accounts.
The central bank is waiting for more clarity on the economic outlook and the impact of President Trump’s policies on tariffs, immigration, and widespread federal job cuts. Mr. Trump has publicly attacked Fed Chair Jerome H. Powell and his colleagues for keeping borrowing costs too high.
The Fed’s benchmark rate is set at a range of 4.25 to 4.5 percent. In an effort to tamp down inflation, the central bank began lifting rates rapidly — from near zero to above 5 percent — between March 2022 and July 2023. Prices have cooled considerably since then, and the Fed pivoted to rate cuts, lowering rates in September, November and December.
Mr. Trump’s inflation-stoking polices could prompt the Fed to delay more rate cuts. But at the same time, longer-term interest rates set by the markets have been extremely volatile, influencing a wide range of consumer and business borrowing costs.
Auto Rates
What’s happening now: Auto rates have been trending higher and car prices remain elevated, making affordability a challenge. And that is before U.S. tariffs threaten to push prices up even more.
Car loans tend to track with the yield on the five-year Treasury note, which is influenced by the Fed’s key rate. But other factors determine how much borrowers actually pay, including your credit history, the type of vehicle, the loan term and the down payment. Lenders also take into consideration the levels of borrowers becoming delinquent on auto loans. As those move higher, so do rates, which makes qualifying for a loan more difficult, particularly for those with lower credit scores.
The average rate on new car loans was 7.2 percent in March, according to Edmunds, a car shopping website, unchanged from February and March 2024. Rates for used cars were higher: The average loan carried an 11.5 percent rate in March, compared with 11.3 percent in February and 11.9 percent in March 2024.
Where and how to shop: Once you establish your budget, get preapproved for a car loan through a credit union or bank (Capital One and Ally are two of the largest auto lenders) so you have a point of reference to compare financing available through the dealership, if you decide to go that route. Always negotiate on the price of the car (including all fees), not the monthly payments, which can obscure the loan terms and what you’ll be paying in total over the life of the loan.
Credit Cards
What’s happening now: The interest rates you pay on any balances that you carry had edged slightly lower after the most recent Fed cuts, but the decreases have slowed, experts said. Last week, the average interest rate on credit cards was 20.09 percent, according to Bankrate.
Much depends, however, on your credit score and the type of card. Rewards cards, for instance, often charge higher-than-average interest rates.
Where and how to shop: Last year, the Consumer Financial Protection Bureau sent up a flare to let people know that the 25 biggest credit-card issuers had rates that were eight to 10 percentage points higher than smaller banks or credit unions. For the average cardholder, that can add up to $400 to $500 more in interest a year.
Consider seeking out a smaller bank or credit union that might offer you a better deal. Many credit unions require you to work or live someplace particular to qualify for membership, but some bigger credit unions may have looser rules.
Before you make a move, call your current card issuer and ask them to match the best interest rate you’ve found in the marketplace that you’ve already qualified for. And if you do transfer your balance, keep a close eye on fees and what your interest rate would jump to once the introductory period expires.
Mortgages
What’s happening now: Mortgage rates have been volatile. Rates peaked at about 7.8 percent late last year and had fallen as low as 6.08 percent in late September. Solid economic data and concerns about Mr. Trump’s potentially inflationary agenda pushed rates a bit higher again, though they’ve steadied in recent weeks.
Rates on 30-year fixed-rate mortgages don’t move in tandem with the Fed’s benchmark, but instead generally track with the yield on 10-year Treasury bonds, which are influenced by a variety of factors, including expectations about inflation, the Fed’s actions and how investors react.
The average rate on a 30-year fixed-rate mortgage was 6.76 percent as of May 1, down from 6.81 percent the previous week and 7.22 percent a year ago.
Other home loans are more closely tethered to the central bank’s decisions. Home-equity lines of credit and adjustable-rate mortgages — which carry variable interest rates — generally adjust within two billing cycles after a change in the Fed’s rates.
Where and how to shop: Prospective home buyers would be wise to get several mortgage rate quotes — on the same day, since rates fluctuate — from a selection of mortgage brokers, banks and credit unions.
That should include: the rate you’ll pay; any discount points, which are optional fees buyers can pay to “buy down” their interest rate; and other items like lender-related fees. Look to the “annual percentage rate,” which usually includes these items, to get an apples-to-apples comparison of your total costs across different loans. Just be sure to ask what’s included in the A.P.R.
Savings Accounts and C.D.s
What’s happening now: Everything from online savings accounts and certificates of deposit to money market funds tend to move in line with the Fed’s policy.
Savers are no longer benefiting from the juiciest yields, but you can still find returns at online banks of 4 percent or more. “The Fed taking its foot off the gas with rate cuts means that these yields are likely to stay high for a while, but it won’t last forever,” said Matt Schulz, chief consumer finance analyst at LendingTree, the online loan marketplace.
Traditional commercial banks’ yields, meanwhile, have remained anemic throughout this period of higher rates. The national average savings account rate was recently 0.61 percent, according to Bankrate.
Where and how to shop: Rates are one consideration, but you’ll also want to look at providers’ history, minimum deposit requirements and any fees (high-yield savings accounts don’t usually charge fees, but other products, like money market funds, do). DepositAccounts.com, part of LendingTree, tracks rates across thousands of institutions and is a good place to start comparing providers.
Check out our colleague Jeff Sommer’s columns for more insight into money-market funds. The yield on the Crane 100 Money Fund Index, which tracks the largest money-market funds, was 4.14 percent as of Tuesday, down from 5.15 percent in February 2024.
Student Loans
What’s happening now: There are two main types of student loans. Most people turn to federal loans first. Their interest rates are fixed for the life of the loan, they’re far easier for teenagers to get and their repayment terms are more generous.
Current rates are 6.53 percent for undergraduates, 8.08 percent for unsubsidized graduate student loans and 9.08 percent for the PLUS loans that both parents and graduate students use. Rates reset on July 1 each year and follow a formula based on the 10-year Treasury bond auction in May.
Private student loans are a bit of a wild card. Undergraduates often need a co-signer, rates can be fixed or variable and much depends on your credit score.
Where and how to shop: Many banks and credit unions want nothing to do with student loans, so you’ll want to shop around extensively, including with lenders that specialize in private student loans.
You’ll often see online ads and websites offering interest rates from each lender that can range by 15 percentage points or so. As a result, you’ll need to give up a fair bit of information before getting an actual price quote.
In an expansion of its business of processing pharmaceuticals in Earth’s orbit, Varda Space Industries is renting a large El Segundo plant where toy manufacturer Mattel used to design Hot Wheels and Barbie dolls.
The plant in El Segundo’s aerospace corridor will be an extension of Varda Space Industries’ headquarters in a much smaller building on nearby Aviation Boulevard.
Varda will occupy a 205,443-square-foot industrial and office campus at 2031 E. Mariposa Ave., which will give it additional capacity to manufacture spacecraft at scale, the company said.
Originally built in the 1940s as an aircraft facility, the complex has a history as part of aerospace and defense industries that have long shaped the South Bay and is near a host of major defense and space contractors. It is also close to Los Angeles Air Force Base, headquarters to the Space Systems Command.
Workers test AstroForge’s Odin asteroid probe, which was lost in space after launch this year.
(Varda Space Industries)
Varda is one of a new generation of aerospace startups that have flourished in Southern California and the South Bay over the last several years, particularly in El Segundo, often with ties to SpaceX.
Elon Musk’s company, founded in 2002 in El Segundo, has revolutionized the industry with reusable rockets that have radically lowered the cost of lifting payloads into space. Though it has moved its headquarters to Texas, SpaceX retains large-scale operations in Hawthorne.
Varda co-founder and Chief Executive Will Bruey is a former SpaceX avionics engineer, and the company’s spacecraft are launched on SpaceX’s workhorse Falcon 9 rockets from Vandenberg Space Force Base in Santa Barbara County.
Varda makes automated labs that look like cylindrical desktop speakers, which it sends into orbit in capsules and satellite platforms it also builds. There, in microgravity, the miniature labs grow molecular crystals that are purer than those produced in Earth’s gravity for use in pharmaceuticals.
It has contracts with drug companies and also the military, which tests technology at hypersonic speeds as the capsules return to Earth.
Its fifth capsule was launched in November and returned to Earth in late January; its next mission is set in the coming weeks. Varda has more than 10 missions scheduled on Falcon 9s through 2028.
For the last several decades, the Mariposa Avenue property served as the research and development center for Mattel Toys. El Segundo has also long been a center for the toy industry as companies like to set up shop in the shadow of Mattel.
The Mattel facility “has always been an exceptional property with a legacy tied to aerospace innovation, and leasing to Varda Space Industries feels like a natural continuation of that story,” said Michael Woods, a partner at GPI Cos., which owns the property.
“We are proud to support a company that is genuinely pushing the boundaries of what’s possible, and are excited to watch Varda grow and thrive here in El Segundo,” Woods said.
As one of the country’s most active hubs of aerospace and defense innovation, El Segundo has seen its industrial property vacancy fall to 3.4% on demand from space companies, government contractors and technology startups, real estate brokerage CBRE said.
Successful startups often have to leave the neighborhood when they want to expand, real estate broker Bob Haley of CBRE said. The 9-acre Mattel facility was big enough to keep Varda in the city.
Last year, Varda subleased about 55,000 square feet of lab space from alternative protein company Beyond Meat at 888 Douglas St. in El Segundo, which it started moving into in June.
Varda will get the keys to its new building in December and spend four to eight months building production and assembly facilities as it ramps up operations. By the end of next year, it expects to have constructed 10 more spacecraft.
In the future, Varda could consolidate offices there, given its size. Currently, though, the plan is to retain all properties, creating a campus of three buildings within a mile of one another that are served by the company’s transportation services, Chief Operating Officer Jonathan Barr said.
“We already have Varda-branded shuttles running up and down Aviation Boulevard,” he said.
Ships near the Strait of Hormuz before and after attacks began
Every day, around 80 oil and gas tankers typically pass through the Strait of Hormuz, the narrow waterway off Iran’s southern coast that carries a fifth of the world’s oil and a significant amount of natural gas.
On Monday, just two oil and gas tankers appear to have crossed the strait, according to a New York Times analysis of shipping activity from Kpler, an industry data firm. Since then, one tanker passed through.
“It’s a de facto closure,” said Dan Pickering, chief investment officer of Pickering Energy Partners, a Houston financial services firm. “You’ve got a significant number of vessels on either side of the strait but no one is willing to go through.”
Tankers have been staying away from Hormuz since the U.S.-Israeli attacks on Iran that began on Saturday. A prolonged conflict could ripple broadly across the global economy, threatening the energy supplies of countries halfway around the world and stoking inflation.
International oil prices have climbed 12 percent since the fighting began, trading Tuesday around $81 a barrel, and natural gas prices have surged in Europe and in Asia.
A senior Iranian military official threatened on Monday to “set on fire” any ships traveling through the Strait of Hormuz. Vessels in the region have already come under attack. Several oil and gas facilities have also been struck or affected by nearby shelling, though the damage did not initially appear to be catastrophic.
Where ships and energy facilities have been damaged
A fire broke out Tuesday at a major energy hub in Fujairah, United Arab Emirates, from the falling debris of a downed drone, the authorities said. On Monday, Qatar halted production of liquefied natural gas, or fuel that has been cooled so that it can be transported on ships, after attacks on its facilities.
The sharp reduction in tanker traffic is reducing the supply of oil and gas to world markets, pushing up prices for both commodities. And the longer that ships stay away from the Strait of Hormuz, the less oil and gas get out to the world, which could raise prices even more.
Shipping companies have paused their tankers to protect their crew and cargo, and because insurance companies are charging significantly more to cover vessels in the conflict area.
On Tuesday, President Trump said that “if necessary,” the U.S. Navy would begin escorting tankers through the strait. He also said a U.S. government agency would begin offering “political risk insurance” to shipping lines in the area.
In addition to tankers, other large vessels regularly go through the strait, including car carriers and container ships. In normal conditions, nearly 160 make the trip each day.
Some ships in the region turn off the devices that broadcast their positions, while others transmit false locations — making it hard to give a full picture of the traffic in the strait.
The Shiva is a small oil tanker that has repeatedly faked its location, according to TankerTrackers.com, which tracks global oil shipments. It is suspected of carrying sanctioned Iranian oil, according to Kpler. The Shiva was one of the two tankers that crossed the strait on Monday.
The oil and gas that typically move through the strait come from big producing countries like Saudi Arabia, Iraq, Iran and United Arab Emirates, and are exported around the world.
Where tankers moving through the Strait have traveled
In 2024, more than 80 percent of the oil and gas transported through the Strait of Hormuz went to Asia. China, India, Japan and South Korea were the top importers, according to the U.S. Energy Information Administration.
Countries have energy stockpiles that could last them into the coming months, but a continued shutdown of the strait could damage their economies.
Several big disruptions have roiled supply chains in recent years, but the tanker standstill in the Strait of Hormuz could have an outsize impact.
Paramount Skydance’s jubilation over its come-from-behind victory to claim Warner Bros. Discovery has entered a new phase:
Call it the deal-debt hangover.
Two major ratings agencies have raised concerns about Paramount’s credit because of the enormous debt the David Ellison-led company will have to shoulder — at least $79 billion — once it absorbs the larger Warner Bros. Discovery, bringing CNN, HBO, TBS and Cartoon Network into the Paramount fold.
Fitch Ratings said Monday that it placed Paramount on its “negative” ratings watch, and downgraded its credit to BB+ from BBB-, which puts the company’s credit into “junk” territory. Fitch said it took action due to “uncertainty” surrounding Paramount’s $110-billion deal for Warner Bros. Discovery, which the boards of both companies approved on Friday.
S&P Global Ratings took similar action.
To finance the Warner takeover, Ellison’s billionaire father, Larry Ellison, has agreed to guarantee the $45.7 billion in equity needed. Bank of America, Citibank and Apollo Global have agreed to provide Paramount with more than $54 billion in debt financing.
“Potential credit risks include the prospective debt-funded structure, Fitch’s expectation of materially elevated leverage and limited visibility on post-transaction financial policy and capital structure,” Fitch said.
Late last week, Paramount sent $2.8 billion to Netflix as a “termination fee” to officially end the streaming giant’s pursuit of Warner Bros. That payment paved the way for Warner and Paramount’s board to enter into the new merger agreement.
Paramount hopes the merger will be wrapped up by the end of September. It needs the approval of Warner Bros. Discovery shareholders and regulators, including the European Union.
Paramount executives acknowledged this week the new company would emerge with $79 billion in debt — a considerably higher total than what Warner Bros. Discovery had following its spinoff from AT&T. That 2022 transaction left Warner Bros. Discovery with nearly $55 billion of debt, a burden that led to endless waves of cost-cutting, including thousands of layoffs and dozens of canceled projects.
Warner still has $33.5 billion in debt, a lingering legacy that will be passed on to Paramount.
Paramount plans to restructure about $15 billion in Warner Bros. Discovery’s existing debt.
Paramount CEO David Ellison at a 2024 movie premiere for a Netflix show.
(Evan Agostini / Invision / AP)
Paramount told Wall Street it would find more than $6 billion in cost cuts or “synergies” within three years — a number that has weighed heavily on entertainment industry workers, particularly in Los Angeles.
Hollywood already is reeling from previous mergers in addition to a sharp pullback in film and television production locally as filmmakers chase tax credits offered overseas and in other states, including New York and New Jersey.
Some entertainment executives, including Netflix Co-Chief Executive Ted Sarandos, have speculated that Paramount will need to find more than $10 billion in cost cuts to make the math work. More recently, Sarandos went higher, telling Bloomberg News that Paramount may need $16 billion in cuts.
Cognizant of widespread fears about additional layoffs, Paramount Chief Operating Officer Andrew Gordon took steps this week to try to tamp down such concerns.
Gordon is a former Goldman Sachs banker and a former executive with RedBird Capital Partners, an investor in Paramount and the proposed Warner Bros. deal. He joined Paramount last August as part of the Ellison takeover.
During a conference call Monday with analysts, Gordon said Paramount would look beyond the workforce for cuts because the company wants to maintain its film and TV production levels.
Paramount plans to look for cost savings by consolidating the “technology stacks and cloud providers” for its streaming services, including Paramount+ and HBO Max, Gordon said. The company also would search for reductions in corporate overhead, marketing expenses, procurement, business services and “optimizing the combined real estate footprint.”
It’s unclear whether Paramount would sell the historic Melrose Avenue lot or simply centralize the sprawling operations onto the Warner Bros. and Paramount lots in Burbank and Hollywood.
Workers are scattered throughout the region.
HBO, owned by Warner Bros. Discovery, maintains its West Coast headquarters in Culver City; CBS television stations operate from CBS’ former lot off Radford Avenue in Studio City; and CBS Entertainment and Paramount cable channels executive teams are located in a high-rise off Gower Street and Sunset Boulevard, blocks from the Paramount movie studio lot.
“The combination of PSKY and WBD could create a materially stronger business than either individual entity,” Standard & Poor’s said in its note to investors. “However, this transaction presents unique challenges because it would involve the combination of three companies, with the smallest, Skydance, being the controlling entity.”
David Ellison’s production firm, Skydance Media, was the entity that bought Paramount, creating Paramount Skydance.
Ellison has not announced what the combined company will be called.
Paramount shares closed down more than 6% Tuesday to $12.45.
Warner Bros. Discovery fell 1% to $28.20. Netflix added less than 1% to close at $97.70.
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