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Key takeaways
- And with the Fed likely to cut interest rates by a quarter point this week, APY savings should fall by a similar amount – meaning they will fall, not collapse.
- To stay ahead of inflation, aim for a savings rate that clears today’s 3% inflation mark so your money continues to gain value.
- High-yield savings accounts and CDs still pay between 4% and 5%, making it easier for savers to keep their money growing faster than inflation.
What the Fed’s move could do to your savings rate
Financial markets overwhelmingly expect the Federal Reserve to announce another quarter-point rate cut on Wednesday. This is important for anyone with cash in the bank, because the central bank’s benchmark interest rate affects what banks and credit unions are willing to pay on customer deposits. This means that even a small shift will likely extend your savings account APY.
If the Fed does make a quarter-point cut, savings and certificate of deposit yields are expected to fall slightly in the following weeks — roughly in line with the size of the Fed’s move. That will be a change, but it’s not free fall. Even after this adjustment, many of today’s high-yield savings accounts will still offer interest rates in the 3% to mid-4% range.
No matter the pricing environment, it’s always wise to track how your current price compares to the competition. If your APY is much lower than what high-yield savings accounts pay, transferring your money can boost your yield even as rates fall.
Why is this important to you?
Even as the Fed cuts interest rates again, savings rates will fall, not collapse. To stay ahead of inflation, check if your current APY is competitive — and move your money if it’s not.
How do you know if you are getting a good savings rate?
Whatever your savings balance, it’s helpful to ask a simple question: Is your money earning the return it should? One practical criterion is to target an APY that at least keeps pace with inflation so that the value of your money grows rather than declines. With today’s inflation rate at around 3%, any savings earning less than that actually lose value over time.
Currently, the best high-yield savings accounts pay between 4.15% and 5.00% on an annual basis. Although some require additional conditions to be met, many come without any. Compared to the inflation rate of 3%, this cushion is meaningful and can help your savings continue to grow.
Naturally, these rates are expected to decline if the Federal Reserve announces a cut this week. But the highest APYs will still be strong by historical standards. Even with a moderate downward shift, many accounts will still provide returns comfortably above today’s inflation index.
Quick fact
Each bank handles interest rate cuts differently. Some will lower their savings rate a little at a time, while others may lower it in one step. That’s why it’s helpful to watch your APY, not just the headlines.
The smart move is to be proactive. Every day you deposit your money into a low-paying account is a day you’re not working as hard as you can. The sooner you act, the sooner you can achieve higher returns today before they decline.
Why CDs can still offer strong, guaranteed returns with low prices
If you have savings that you won’t need to touch for a while, a CD offers something rare in a variable rate environment: a guarantee of return. CDs allow you to set aside a lump sum and lock in a pool of APY for the period you choose – typically 3 months to 5 years.
Securing a competitive return can be especially valuable if interest rates continue to fall. Savings and money market accounts can adjust their yields at any time, but a CD continues to pay the same rate until it matures. By putting some extra cash into one of the nation’s best CDs today, you can get a solid rate and steady earnings no matter what moves the Fed makes this week and next year.
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