Will savings rates remain high until 2026? Here’s the key indicator to watch

What has changed in expectations for federal interest rate cuts?

When you want to know where bank savings rates are headed, it all depends on what the Federal Reserve does next. This is because the Federal Reserve’s benchmark rate directly affects the amount banks and credit unions pay on savings, money market, and CD accounts.

A month ago, markets were almost certain that the Fed would cut its key interest rate twice before the end of the year — once in late October and again in mid-December. The first prediction came true when the central bank cut interest rates on October 29. But since then, the odds of another rate cut in 2025 have dropped sharply. Markets currently place the chances of a quarter-point cut at the December 10 meeting at just 50-50.

Uncertainty stems from several intersecting streams. The government shutdown has delayed key economic data releases, leaving the Fed with less visibility on inflation and growth. At the same time, central bankers had to balance competing information: the labor market gave conflicting signals and inflation rose.

The Fed’s fixes for these problems go in opposite directions — lowering interest rates can support jobs, while keeping interest rates steady helps fight inflation.

With limited data and divided priorities, Fed officials themselves are divided over what to do next. The decision won’t come until December, but for now, markets are quite uncertain, calculating the odds that the Fed will stay in place rather than cut again.

How this might affect what you’ll earn for your money

Because the Fed’s interest rate directly affects what banks and credit unions pay on savings, a pause in December will be good news for savers. Instead of the steady decline that many have expected, interest rates could remain roughly where they are now. If the Fed decides to abandon the cut next month, an early change wouldn’t come until late January, keeping today’s strong yields in place for a little while longer.

Although what you can earn from savings accounts and CDs has declined from the highs of 2023-2024, returns are still historically strong. Today’s best high-yield savings accounts pay in the average 4% range, with a few even offering 5%. The best CDs also remain attractive, with guaranteed returns available between 4.00% and 4.50% over each term from 3 months to 5 years.

How to Track Interest Rate Cut Prospects Like a Pro

What the Fed decides is never certain until it is formally announced at the end of each meeting. Every six weeks or so, central bankers meet for two days to review the latest economic data and discuss whether the benchmark interest rate should be changed. Since no one knows what new data will emerge before each meeting, any predictions are just an educated guess.

But the financial markets make these guesses in real time, and you can see for yourself. The CME FedWatch tool shows the probabilities that traders assign to various price outcomes at upcoming Federal Reserve meetings. You don’t have to be a Wall Street insider to use it.

Click on the widget, and you’ll see tabs for every scheduled Fed meeting. For example, selecting the December 10 tab at the top will display the current market odds for different price scenarios. The chart above indicates today’s target range (for example, “375-400” at the moment, which means a federal funds rate of 3.75%-4.00%) and compares it to potential new ranges. The column labeled 350-375 represents the probability of a quarter-point downgrade, while 375-400 shows the probability of no change from today’s level.

These bars are constantly moving, sometimes rising or falling with daily headlines, and other times swinging sharply after new data or Fed comments. Checking the chart regularly is the easiest way to understand the Fed’s forecasts and anticipate how savings and certificate of deposit rates will move next.