The Federal Reserve decided to hold interest rates steady for the fifth consecutive time at its most recent policy-setting meeting in March. Since March of 2022, the central bank has been increasing interest rates in an attempt to combat high inflation, which peaked at 9.1%. And while this caused savings rates to rapidly increase, they've been dropping since the Fed began to put a pause on 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. However, several rate cuts are slated for later this year. The Federal Reserve maintains their earlier projection that there will be three interest rate cuts in 2024 to reduce the federal funds rate to a range of 4.5% to 4.75%.
The official press release states: "In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. 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 fall. And when the Federal Reserve cuts interest rates this year, savings rates will likely drop even further.
As rates continue to go down, consider locking in rates while they're still high. In fact, 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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