Carla Ayers
Typically, when the Fed raises interest rates, banks increase the yields on savings accounts to attract deposits. Conversely, rate cuts often lead to reduced returns for savers.
With the Fed meeting next week and likely keeping rates steady, the interest rates on savings accounts are expected to remain relatively stable in the short term.
It means that high-yield savings accounts (HYSAs) and certificates of deposit (CDs) will likely continue to offer attractive annual percentage yields (APYs), with some exceeding 4%. For example, Axos Bank currently offers a HYSA with an APY of 4.66%. This is great news for savers looking to maximize their returns.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Find the best high-yield savings options with this Bankrate tool:
While the Federal Reserve has currently paused rate changes, future decisions will depend on economic indicators such as inflation, employment data and the impact of recent trade policies.
Should the Fed decide to cut rates in the future, yields on savings accounts may gradually decline.
In the meantime, it makes since to strike while the iron is hot. If you're looking to grow your money effortlessly while outpacing inflation, a high-yield savings account can achieve both for you.
Another option, which can help you avoid falling rates completely, is to open a CD account. Since the APY on a CD account is fixed, if you lock up your cash in one now, you won't have to worry about your APY going down until the CD matures.
Just make sure you're comfortable with not being able to access your cash until the account matures.
The Fed's impact on savings rates
Beginning in March 2022, the Federal Reserve initiated a series of 11 interest rate hikes to combat soaring inflation, which peaked at 9.1%. This aggressive monetary tightening elevated the federal funds rate to a target range of 5.25% to 5.50%, marking the highest level in 23 years.
However, as inflationary pressures began to subside, the Federal Reserve shifted its stance, opting to hold interest rates steady in the first quarter of 2025.
This pause in rate hikes led to a stabilization, and in some cases, a slight decline in savings rates. Financial institutions adjusted their offerings accordingly, with some reducing the APYs on their savings products.
Looking ahead, it's unlikely the Fed will cut rates when they meet next week. This gives savers a chance to maximize returns now, while the season is favorable for doing so.
If you're looking to lock in a higher rate of return regardless of what the Fed decides, here are some of the top CD options to consider:
Related Content
-
Last Call for Fortnite Refunds: Parents Can Still File a ClaimThe FTC is sending out $126 million in refunds to families whose kids were charged for unwanted items in Fortnite — and there’s still time to file a claim.
-
Stock Market Today: Stocks Swing as Trump Scraps Canada Trade TalksDespite a mid-afternoon slip, the S&P 500 and Nasdaq ended the day at new record highs.
-
Stock Market Today: Stocks Swing as Trump Scraps Canada Trade Talks
Despite a mid-afternoon slip, the S&P 500 and Nasdaq ended the day at new record highs.
-
How to Choose a Mortgage Lender in Five StepsNot all lenders are created equal — here’s how to compare offers, rates and terms with confidence.
-
A Meteorite May Have Hit a Home in Georgia. Would Insurance Cover the Damage?In a rare event, a meteorite may have crashed through the roof of a Georgia homeowner. Here’s what home insurance would cover.
-
My Car Was Stolen — Here’s What I Did and How You Can Protect YourselfDon’t wait until it happens to you. Learn how to prepare for auto theft, protect your vehicle and respond quickly if your car is stolen.
-
Why Smart Retirees Are Ditching Traditional Financial PlansFinancial plans based purely on growth, like the 60/40 portfolio, are built for a different era. Today’s retirees need plans based on real-life risks and goals and that feature these four elements.
-
To My Small Business: Well, I've Been Afraid of Changin', 'Cause I've Built My Life Around YouWhile thinking about succession planning might feel like anticipating a landslide (here's to you, Fleetwood Mac), there are strategies you can implement to manage the uncertainty and the transition.
-
Stock Market Today: S&P 500, Nasdaq Near New HighsThe S&P 500 hasn't hit a new high since February. It's been since December for the Nasdaq.
-
The Bull Case for the Second Half of 2025This strategist sees a volatile market segueing to a strong close this year.
