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 keeping rates steady, the interest rates on savings accounts are expected to remain relatively stable in the short term.
The Federal Reserve's recent decision to maintain interest rates between 4.25% and 4.50% 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 4.86%. This is great news for savers looking to maximize their returns.
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.
Still, if you don't already have one, it's worth opening a high-yield savings account despite the next Fed meeting, so you can take advantage of high rates before they significantly fall. Even though rates are lower, there are still higher returns for your cash in high-yield savings accounts than sitting in an average checking or savings account.
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, if the Federal Reserve moves to cut interest rates in response to cooling inflation, savers can anticipate further decreases in the yields of HYSAs and CDs. To optimize returns in a shifting economic landscape, it's important to stay informed. By regularly comparing offerings from various financial institutions, savers can adjust their strategies effectively to maintain favorable returns.
You can compare savings rates for both high-yield savings accounts and CDs below.
