Kiplinger Interest Rates Outlook: Crosscurrents Keeping Rates in Narrow Band
Interest rates will stay in a holding pattern, as concerns about future inflation balance fears of an economic slowdown. The Federal Reserve is also on hold.

Kiplinger’s Economic Outlooks are written by the staff of our weekly Kiplinger Letter and are unavailable elsewhere. Click here for a free issue of The Kiplinger Letter or to subscribe for the latest trends and forecasts from our highly experienced Kiplinger Letter team.
Federal Reserve Chair Jerome Powell emphasized that the Fed won’t cut rates until it has a better understanding of how higher tariffs affect longer-term inflation expectations. Because price effects from tariffs take time to work through the supply chain to the consumer, that will not be soon. Even though tariffs have not had much of an impact on inflation so far, Powell noted that all professional forecasters are saying tariffs will raise inflation this year, at least temporarily. Because of the danger that these price increases could affect longer-term inflation expectations, it is necessary to maintain a moderately restrictive monetary policy, as the Fed has been doing.
The Fed also released its new economic projections, showing that, by a 12-to-7 majority vote, the Federal Open Market Committee (FOMC) thought rates would be lower by the end of the year. About half of the committee expects two quarter-point cuts. It's worth noting, though, that seven committee members felt rates will be unchanged at the end of the year. Committee members raised their inflation projections a bit, indicating that any cut in rates would likely have to come with evidence of a slowing economy. The Fed’s next meeting is July 30.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Long-term interest rates will remain in a narrow range. With the Fed standing pat, and with President Trump’s deficit-widening fiscal bill working its way through Congress, Treasury investors have become nervous about the potential consequences. That, and inflation concerns provoked by tariffs, have caused long-term rates to move upwards in the past month, balancing fears of an economic slowdown that had caused them to dip a bit recently.
The potential impact of future government fiscal deficits has become a new worry for bond investors. Large deficits mean that the supply of Treasury securities could, at times, be higher than investor demand for them. That would cause prices to decline and bond yields to rise. Whether Treasury auctions will be soft or not is usually unknowable in advance, and can catch investors unawares. The stock market also often reacts negatively when yields rise.
Mortgage rates won’t be changing much for now. 30-year fixed-rate mortgages are still around 6.8%, while 15-year loans are at 5.9% for borrowers with good credit. If the economy weakens, then rates should ease a bit. Mortgage rates are still higher than normal relative to Treasuries, but whenever the Fed cuts short-term rates again, it will boost banks’ lending margins, which should eventually lower mortgage rates a bit, too.
The Fed is allowing Treasury securities to mature and run off its balance sheet at $5 billion per month. But it is running off mortgage-backed securities at $35 billion per month. The central bank would like to get non-Treasuries out of its portfolio as much as possible, in order to avoid creating unintended influences on those asset markets over the long term. The disparate treatment of the Fed’s balance sheet may keep mortgage rates elevated a bit more than usual over the 10-year Treasury note’s yield.
Top-rated corporate bond yields have also been treading water along with Treasury yields. AAA-rated long-term corporate bonds are yielding 4.9%, BBB-rated bonds are at 5.4%, and CCC-rated bonds have eased to 13.1% from their 15.2% peak in April on reduced recession fears. But they are still above their early March level of 12%.
Related Content
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

David is both staff economist and reporter for The Kiplinger Letter, overseeing Kiplinger forecasts for the U.S. and world economies. Previously, he was senior principal economist in the Center for Forecasting and Modeling at IHS/GlobalInsight, and an economist in the Chief Economist's Office of the U.S. Department of Commerce. David has co-written weekly reports on economic conditions since 1992, and has forecasted GDP and its components since 1995, beating the Blue Chip Indicators forecasts two-thirds of the time. David is a Certified Business Economist as recognized by the National Association for Business Economics. He has two master's degrees and is ABD in economics from the University of North Carolina at Chapel Hill.
-
Stock Market Today: Stocks Chop as Chipmakers Decline
Several semiconductor stocks fell Friday on reports that the White House may consider revising license waivers for global chipmakers.
-
A Cruiser’s Guide to Carnival’s Revamped Rewards Program
With Carnival launching a revamped dual‑earning loyalty program in June 2026, learn how to rack up points and tier status more strategically — aboard and ashore.
-
Stock Market Today: Stocks Chop as Chipmakers Decline
Several semiconductor stocks fell Friday on reports that the White House may consider revising license waivers for global chipmakers.
-
A Cruiser’s Guide to Carnival’s Revamped Rewards Program
With Carnival launching a revamped dual‑earning loyalty program in June 2026, learn how to rack up points and tier status more strategically — aboard and ashore.
-
How to Shop Smarter as Tariffs Drive Up Prices in 2025
Tariff fatigue is real. Here’s how to save as prices rise and uncertainty grows.
-
The $1 Million Retirement Question: Are You Being Tax-Smart About Your Pension?
A financial planner raises some key considerations for navigating retirement with a pension and recommends four strategies.
-
The Costly Mistake You Might Be Making With Your First 401(k)
Most people start contributing to their retirement savings later in life. That could be a big-time mistake, literally costing you thousands of dollars.
-
Why I Trust Bonds, Even Now
Columnist Jeffrey Kosnett explains why he stands by investing in bonds.
-
An Estate Planning Attorney's Guide to the Importance of POAs
Regularly updating your financial and health care power of attorney documents ensures they reflect your current intentions and circumstances. It's also important to clearly communicate your wishes to your chosen agents.
-
Divorce and Your Home: An Expert's Guide to Avoiding a Tax Bomb
Your home is probably your biggest asset, so if you're getting a divorce, the stakes are high. Keep it? Sell it? You need to have a good plan in place for how to handle it.