If you were holding out for lower interest rates on credits cards or mortgages, expect to only see modest relief for the remainder of the year and much of 2025.

That's because the Federal Reserve is keeping its benchmark interest rate steady to discourage borrowing, which it will do until there's more evidence that inflation is under control.

Unfortunately for borrowers, inflation isn't under control — at least, not quite yet.

While the annual inflation rate has fallen from a peak of 9.1% in June 2022, it's been hovering closer to 3% for the past 10 months. That's still above the Fed's target rate of 2%.

On Wednesday, inflation remained mostly in line with expectations, ticking up 0.3% in April after increasing by 0.4% in March, according to the latest data from the consumer price index. The year-over-year inflation rate is now 3.4% — down slightly from 3.5% in March.

While inflation seems to be trending in the right direction, there's still a long way to go considering how hard it's been to get down to 2%. For that reason, the central bank is expected to keep interest rates relatively high well into 2025.

How interest rate cuts will play out

The Fed's current benchmark lending rate is a range between 5.25% and 5.5% — the highest it's been in 23 years. This rate influences what you pay in interest for loans, credit cards, auto financing and, indirectly, what you pay for mortgages, too.

Most forecasts predict two 0.25 percentage point cuts by the end of the year, with the first cut expected in September. That would bring the federal funds rate to 4.75% to 5%.

Don't expect rates to start dropping much faster after that. By April 2025, there's a 80% probability that the Fed's rate will be 4% or higher, according to the CME FedWatch tool, which uses futures pricing to predict rates.

That's in line with the forecast provided by PNC Financial Services Group, a financial firm that expects the Fed's rate to stay above 4% "through 2025 and beyond."

A rate of 4% will be "considered the long-term equilibrium rate — or 'neutral' rate — at which the U.S. economy will be neither stimulated nor restricted by interest costs," says Kurt Rankin, PNC's senior economist.

Moody's Analytics has a more optimistic forecast, projecting benchmark interest rates in the "high-3% area" by the end of 2025. However, the Fed will need to see "several more months of encouraging disinflation" before it makes cuts, says Matt Colyar, an economist with the company.

Either way, don't hold your breath waiting for the Fed's interest rates to drop back below 3%, like they were in the years leading up to 2022.

The economic climate "will mean higher interest rates for consumers, no doubt about it," says Doug Carey, a chartered financial analyst and president of WealthTrace. "We should be telling borrowers to prepare for higher rates and that we're not going back to 2020's rates any time soon."

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