The Federal Reserve decided to hold interest rates steady for the seventh consecutive time at its most recent policy-setting meeting. Since March 2022, the central bank has been increasing interest rates to combat high inflation, which peaked at 9.1%. And while this caused savings rates to increase rapidly, they've been dropping since the Fed began to pause rate hikes.
As the Federal Reserve once again holds interest rates steady, the Federal Funds rate remains at a target range of 5.25% to 5.5%, the highest it’s been in 23 years. Earlier this year, the Federal Reserve projected three interest rate cuts in 2024 to reduce the federal funds rate to a range of 4.5% to 4.75%. However, higher-than-expected inflation now has officials estimating just one quarter-point cut for the year.
The official press release states: "Inflation has eased over the past year but remains elevated. In recent months, there has been modest further progress toward the Committee’s 2 percent inflation objective." It goes on to say that "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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Here's what the Fed's decision means for savings rates.
What does the Fed’s decision mean for savings rates?
When the Fed raises interest rates, typically rates on savings accounts also go up. Because of this, savings rates rapidly rose when the Fed began hiking interest rates last year. However, since the Federal Reserve decided to hold interest rates steady, savings rates started to slowly fall. If the Fed were to cut interest rates, savings rates would drop much faster. However, inflation rates have caused the Fed to hold off on any rate cuts for the time being.
As rates continue to go down, consider locking in rates while they're still high. Some of the top-earning high-yield savings accounts, money market accounts and CD accounts are still offering rates over 5%. Use the below tool — powered by Bankrate — to compare rates on high-yield savings accounts, as well as CDs, today.
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