In an expected move, the Federal Reserve left the target range for the federal funds rate at 4.25% to 4.5% this week when policymakers had their latest opportunity to modify interest rates.

While Fed chair Jerome Powell said policymakers will “wait for greater clarity” before making their next move, Cox Automotive chief economist Jonathan Smoke is cautious about what it all means for dealerships and finance companies that are in the midst of tax season. They’re hoping federal and state refunds turn into down payments on deliveries or at least the path to get contract holders current again on monthly payments or store revenue in the service drive from overdue vehicle repairs.

“Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people,” Powell reiterated on Wednesday.

“Looking ahead, the new administration is in the process of implementing significant policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation. It is the net effect of these policy changes that will matter for the economy and for the path of monetary policy,” he continued in his opening statement of a news conference.

“While there have been recent developments in some of these areas, especially trade policy, uncertainty around the changes and their effects on the economic outlook is high,” Powell went on to say. “As we parse the incoming information, we are focused on separating the signal from the noise as the outlook evolves.  As we say in our statement, in considering the extent and timing of additional adjustments to the target range for the federal funds rate, the committee will assess incoming data, the evolving outlook, and the balance of risks.

“We do not need to be in a hurry to adjust our policy stance, and we are well positioned to wait for greater clarity,” he added.

Earlier in the week, Comerica Bank said it didn’t expect the Fed to move interest rates, but “markets will closely scrutinize policymakers’ economic and interest forecasts and chair Powell’s comments for clues about the future path of monetary policy.”

One of those markets might be automotive, which is amid an environment where credit access is more available and used-car sales are rising.

“We have yet to see any clear negative impact from higher rates as retail demand has appeared healthy and in line with normal tax-refund-season activity,” Smoke wrote in an analysis posted on Wednesday after the Fed’s announcement.

“It is possible that consumers no longer have expectations of lower rates and have adjusted accordingly. While affordability limits what is possible, 25-year highs in rates force consumers to consider older vehicles to find a price that will deliver a workable monthly payment,” he continued.

Smoke then touched on economic factors that are beyond the control of dealerships and finance companies.

“The economy is still growing, and the unemployment rate remains near full employment, but if growth weakens more, vehicle demand will eventually diminish,” Smoke wrote. “Should tariffs go into effect on Canada and Mexico as planned on April 2, demand could surge initially as consumers in need of a vehicle act to purchase existing inventories before prices rise.

“If tariffs persist, vehicle sales will eventually decline as prices rise. Auto manufacturers are also likely to cut production, keeping supply tight. Some affordable models may be eliminated due to increasing costs that make them no longer attractive to buyers, and that ironically will cause average prices to rise further even when sales are declining,” he continued.

With the spring market already rounding into the form within the wholesale world, Smoke offered this projection as the automotive space transitions from quarter to quarter at the end of March.

“The auto market appears to be on the cusp of a time reminiscent of 2021-2022 but without the benefit of low interest rates,” Smoke wrote.

“As the first quarter of 2025 comes to a close, our market, the economy and the daily headlines are all projecting conflicting signals. What we have in the market today is a new kind of uncertainty — and if there is one thing we know for certain, the auto industry does not respond well to uncertainty,” he added.

Should policymakers get that “greater clarity” they’re seeking, the next opportunity for the Fed to alter interest rates comes on May 7.

“Policy is not on a preset course,” Powell said. “As the economy evolves, we will adjust our policy stance in a manner that best promotes our maximum employment and price stability goals.  If the economy remains strong and inflation does not continue to move sustainably toward 2%, we can maintain policy restraint for longer.

“If the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, we can ease policy accordingly,” he continued. “Our current policy stance is well positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate.”