Fed Poised for Another Rate Cut Amid Consumer Debt Distress

Delinquent auto loans and rising bankruptcy filings signal economic strain, prompting expectations of Fed intervention.

Jan. 27, 2026 at 12:31pm

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According to financial analyst Andrew Zatlin, 5% of all auto loans in the U.S. are now 90 days or more delinquent, a concerning figure that could force the Federal Reserve to implement another interest rate cut in the coming months. Zatlin cites rising credit card delinquencies and bankruptcy filings as further signs of consumer financial distress, which he attributes in part to the impact of recent deportations of undocumented immigrants. With debt servicing levels nearing pre-pandemic highs, Zatlin believes the Fed will need to act to provide relief to struggling households and prop up consumer spending, a critical driver of the U.S. economy.

Why it matters

The health of the consumer economy is a key factor the Federal Reserve considers when setting monetary policy. Rising delinquencies and bankruptcies signal growing financial strain on households, which could undermine consumer spending and broader economic growth. Another rate cut by the Fed would aim to ease this burden by lowering borrowing costs, but also carries the risk of further fueling inflation.

The details

Zatlin points to several concerning trends in consumer credit, including 5% of auto loans being 90 days or more delinquent, compared to a historical average of 3.5%. Subprime auto loans are seeing even higher delinquency rates of 15%, up from 10% historically. Credit card delinquencies and bank loan delinquencies are also well above pre-pandemic levels. Zatlin attributes some of this distress to the impact of recent deportations of undocumented immigrants, who had taken out loans they are now unable to pay back. However, he says the broader issue is consumers becoming overextended on debt, a problem exacerbated by the Fed's previous interest rate hikes.

  • As of November 2025, 5% of all auto loans were 90 days or more delinquent.
  • The Federal Reserve expects the delinquency rate to reach 6%, a level historically associated with financial crises.

The players

Andrew Zatlin

A financial analyst and the editor of Moneyball Economics, a financial news and analysis publication.

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What they’re saying

“5% of all auto loans in the United States are now 90 days or more delinquent. Let me say that again, let it sink in.”

— Andrew Zatlin, Editor, Moneyball Economics (Moneyball Economics)

“When we hit 6%, we are firmly in the zone where we have seen big financial crises, where there is a lot of distress out there.”

— Andrew Zatlin, Editor, Moneyball Economics (Moneyball Economics)

What’s next

The Federal Reserve is expected to consider another interest rate cut in the coming months to provide relief to struggling consumers and prop up the broader economy.

The takeaway

Rising consumer debt delinquencies and bankruptcies are flashing warning signs about the health of the U.S. economy, forcing the Federal Reserve to weigh another interest rate cut to ease the financial strain on households and support consumer spending.