Fed will vote on rates less often. What that could mean for borrowers - CNBC

After the Federal Reserve held its benchmark interest rate steady last week, Fed Chairman Kevin Warsh announced plans to reduce the number of rate-setting votes over the next two years. That move could potentially extend the timeline for everyday Americans to see borrowing costs adjust, some experts say.

"Fewer Fed meetings in 2027 could mean consumers wait longer to see relief when borrowing costs are elevated," said James Vrachas, executive director at advisory firm Post Oak Group.

Americans may feel somewhat removed from the Fed, but the central bank's moves have a ripple effect on many types of consumer products, including the borrowing rates for credit cards, home loans and auto financing.

For example, most credit cards have variable rates tied to the prime rate, which moves with the Fed's benchmark. However, even with the central bank holding rates unchanged, credit card rates are edging higher as issuers protect themselves from risk, according to LendingTree.

Card issuers are mitigating their exposure from borrowers who may fall behind on payments or default in the face of stubborn inflation in everyday expenses, said Matt Schulz, LendingTree's chief credit analyst.

Generally, card issuers are slow to bring rates down, unless prompted by the Fed's actions, said Schulz: "Issuers will tinker with rates a bit at the margins at other times, but the big moves tend to only come when issuers are pushed."

On Oct. 28, the central bank voted to keep the benchmark borrowing rate at the current target range of 3.75% to 4% as policymakers deliberated next steps with inflation remaining well above the Fed's 2% goal.

The Fed will keep meeting eight times a year, Warsh said at the news conference following the October meeting, but next year, one of the eight meetings will not entail a vote on interest rates or include a post-meeting statement. The "strategy" meetings will increase to two the following year, leaving just six opportunities to adjust rates — with the exception of emergency meetings, if necessary.

"For consumers, that could mean longer periods of uncertainty around borrowing costs," said Jordan Ricciardi, a senior wealth strategy associate at UBS. "Our clients looking to buy a home, refinance a mortgage or finance a business could be impacted as fewer scheduled opportunities means the Fed isn't as quickly responding to changing economic conditions."

With fewer scheduled opportunities to adjust rates, that means borrowing rates could remain stubbornly high even if economic conditions begin to improve, Post Oak Group's Vrachas also said.

As it stands, financial institutions can adjust rates whenever market conditions warrant, regardless of the Fed's meeting schedule, he added. In the meantime, though, many consumers may continue to face elevated borrowing costs for mortgages, car loans and credit card debt, among other financial products.

"For consumers, the bigger concern isn't necessarily fewer meetings, but whether lenders pass along lower borrowing costs as quickly as they pass along increases," Vrachas said.

Consumers may be even more impacted by the lack of transparency, economists say, as Warsh implements measures to curtail so-called forward guidance, or how the Fed signals its future rate moves.

Although economic conditions have become more complicated and information is more widely available, "Warsh keeps his proverbial cards closer to his chest than his recent predecessors have," said Mark Hamrick, an economic analyst and founder of The Hamrick Brief, a weekly newsletter.

"I wouldn't expect consumers to see the universe of market rates change simply because the Fed votes less often," he said. "But the public may have less opportunity to hear from the source about how and why the Fed is making the decisions that shape what they pay to borrow and what they earn on their savings."

In the interim, "the best protection for consumers remains shopping around, particularly for the highest yields among savings accounts and [certificates of deposit]," Hamrick said.

As long as the Fed keeps rates unchanged, some top-yielding online savings accounts are offering interest rates as high as 4% or more, Bankrate data shows. "That's one of the upsides of an elevated interest rate environment: savers can earn meaningfully higher yields," Hamrick said.