We are in a different economic environment than the one the Federal Reserve thought we’d be in less than a year ago. Back in September, the Fed projected four interest rate cuts in 2025. Then in December, it changed rate cut projections to two.

On Wednesday, the Fed kept rates as-is. Fed Chair Jerome Powell said policymakers still project two cuts this year, but tariffs could delay overall progress on lowering inflation.

That means we’re likely to see the federal funds rate hold at or around where it currently is for some time. And that would impact businesses, the housing market and consumers.

The future of interest rates feels fuzzy, because the future of the economy feels fuzzy. David Wilcox, an economist at the Peterson Institute for International Economics and Bloomberg Economics, and a former staff member of the Federal Reserve Board, said all the fuzziness may stick around for a while.

“My own guess is that we won’t get clarity on the direction of the economy before the middle of the year. I think the earliest we could see another interest rate move is in June,” he said.

More likely toward the end of the year, he said. By then, tariffs’ effects on inflation may be clearer, and trade policy itself may be clearer. Regardless, one thing is clear to Wilcox right now: “We’re not going back to the situation that we had immediately pre-Covid.”

The situation being around a decade of low interest rates. Problem is, that period of affordable borrowing makes today’s federal funds rate feel sky high, even though it’s currently lower than the historical average.

“I would anticipate that consumers and businesses will be stuck in that mode for the near future,” said  Linda Hooks, an economist at Washington and Lee University.

That mode — or mindset — affects how businesses and consumers spend.

“Businesses are less likely to get financing that they need to expand their business or invest in new technology or train employees,” Hooks said.

Consumers might put off big purchases, too, like buying a house.

Many would-be buyers have been holding their breath for lower mortgage rates. Laura Veldkamp, an economist at Columbia University, said if there’s a clear signal to buyers that interest rates won’t budge, it could convince them to stop waiting.

Which could jumpstart the housing market again. Though it would likely be a housing market that looks different.

“It may be that we have to reset expectations for what a normal house looks like,” Veldkamp said. 

Something smaller, with more basic finishes. In other words, homebuyers might need to compromise.