The Congressional Budget Office has released new economic projections, expecting the Federal Reserve to cut short-term rates in 2026

WASHINGTON (AP) — The Federal Reserve is expected to cut short-term rates in 2026, with its key interest rate settling at 3.4% towards the end of President Donald Trump 's term in office in 2028, according to a new report released Thursday by the nonpartisan Congressional Budget Office.

The Federal Reserve cut interest rates by 25 basis points at its final meeting of 2025, but the 30-year fixed-rate mortgage remained high at 6.22%.

Everything Americans thought they knew about personal finance was upended when the Federal Reserve started aggressively hiking interest rates to cool post-pandemic inflation. After more than a decade of ultralow rates,

The divergence of opinion on the future of monetary policy is likely to only grow in 2026 as Fed Chairman Jerome Powell reaches the end of his leadership in May. Powell could decide to stay on as a governor, but he has given no indication he would do so and he is a frequent target of criticism from President Donald Trump.

Some Federal Reserve officials who supported cutting a key interest rate earlier this month could have instead backed keeping the rate unchanged, minutes released Tuesday show, underscoring the divisions and uncertainty permeating the central bank.

Treasury Secretary Scott Bessent said Thursday that the Federal Reserve needs to do its part to boost investment in the economy and that interest rates should be substantially lower.

Federal Reserve Governor Stephen Miran, whose term at the U.S. central bank ends later this month, said on Tuesday aggressive U.S. interest rate cuts are needed this year to keep the economy moving forward.

Fed Chair Jerome Powell, with whom Trump has been at odds, will see his term end in May, giving Trump the power to install a new Fed chair. Still, the decision is up to the FOMC, which appears to be growing increasingly divided with each passing Fed meeting.

Savings account yields are much higher than a few years ago Top rates may fall if the Federal Reserve cuts interest rates Online banks tend to offer the best yields available Rates on savings accounts are relatively unchanged compared to a week ago.