The Federal Reserve opted to hold interest rates steady at its most recent policy-setting meeting in January, keeping the federal funds rate at a target range of 5.25% to 5.50%. As interest rates remain steady, future savings rates for high-yield savings accounts may or may not increase. Although a Fed increase would have helped to push rates higher, tighter lending policies may have the same effect.
“Savers have another good year in which their returns will shine, with inflation expected to decline further,” said Greg McBride, CFA, Bankrate’s chief financial analyst in response to the Fed meeting. He predicts two Fed rate cuts in 2024, yet he says CD yields will continue to top inflation.
Should you get a new savings account now?
Typically, as the federal funds rate is increased, banks will raise interest rates on high-yield accounts to stay competitive in the market and attract deposits, meaning you’re more likely to see these rate increases among smaller, online banks as opposed to brick-and-mortar institutions.
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With rates on savings accounts already surpassing 5% in some cases, it's a good idea to park your cash in one of these top-yielding accounts to take advantage of rates while they're still high. As inflation continues to decline, savings rates could go down with it when the Fed starts lowering rates, which it has indicated it may do so next year.
McBride says, “Interest rates took the elevator going up but are going to take the stairs coming down.” He recommends consumers consider locking in longer-term CDs, which are peaking now, and seek out one of the top-yielding savings accounts, which are pulling in more than 5% and are still rising.
Below are today’s high-yield savings rates. If you’re earning a low rate on your savings account, now is a good time to gain with the best rates. While the national average yield for savings accounts is only 0.57 % APY, high-yield accounts offer much more than that, with many rates over 5%.
Wednesday’s Fed action means rates on mortgages, credit card APRs and other loans could decline.
The Fed has raised rates 11 times since March 2022 in an attempt to combat high inflation by driving spending down as consumers realize higher commercial interest rates. When to expect rates cuts is unclear. At their January meeting, the FOMC statement said "the Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent."
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