Can savings accounts top 5%? What another Fed rate hike could mean for savers.

Savings account rates today are higher than previous years. If you’re not already saving with a high-yield savings account, you can be lost 4% to 4.5% or more in annual interest.

But there may be better savings in the near future. The Federal Reserve will meet again this month, where it will decide whether Increase the break rate Or raise rates again — after 10 consecutive hikes since last March. In this environment, it helps to understand how your savings account rates are affected by the Fed’s actions and what it might take. High Yield Savings Account to go above the 5% threshold in the near future.

Compare today’s best savings rates to maximize your balance today.

Can savings accounts top 5% APY?

Savings account rates largely depend The Fed’s move. Although not directly related, banks use rates set by the Fed as a barometer to help them stay competitive among other banks offering similar offerings. High yield savings product

Right now, above the Fed’s target of 5%, it’s common to find high-yield savings accounts offering 4% or 4.25%. A handful of online accounts already offer 4.5% APYBut they’re not the majority, and the highest accounts we’ve found today are tops around 4.85%. Short-term CDs are the most likely to be found More than 5% APY Today, but those accounts come with additional restrictions and potential fees.

However, rates on savings could rise to 5% this year, says Rick Valenzi, CFP and founder of FinancialZane. “Just look at the Fed. If they raise again, savings account rates will go up, too.”

Be the first to earn higher rates in the future by opening a high-yield savings account today

How the Fed’s June meeting could affect savers

However, the Fed’s next steps remain uncertain.

After the recent rate hike, Fed Chairman Jerome Powell The extent of further rate hikes will depend on economic data yet to come. “We will make that determination meeting based on the totality of incoming data and their implications for the outlook for economic activity and inflation,” he said. “And we stand ready to do more if greater monetary policy moderation is warranted.”

But since then the signals have been mixed. There are a few members of the committee recently spoke for Another rate hike, while others say it could make sense Keep the rate the same This month. If there was a break in savings, Valenzi says we could have already reached the peak for savings. Time will tell if the Fed is ready for a rate break, but if it votes for another hike, you could earn 5% on your savings.

Here’s what to know about conservation right now

It may still be unclear whether the Fed will raise rates again or is ready to halt rate hikes, but one thing is certain: Now is a great time to save.

High yield savings account rates That’s already high enough to help you earn hundreds of dollars in your savings balance, while regular savings accounts still earn near-zero-interest rates. Also, these accounts carry variable interest. If rates rise in the future, you’ll automatically benefit from earning the new rate on your total balance.

Brandon R. CFP, founder of Amaral Financial Planning. “The most underutilized strategy I see is using a high-yield savings account,” says Amaral. “A person could save $10,000 at Bank of America and earn only $1 in interest for an entire year. Where they could instead choose a high-yield savings account and earn $1 in interest a day.”

Say you have a $5,000 balance in a high-yield account earning 4.5% interest today. If you maintain that rate for more than a year, you can increase your balance to a total of $5,225. You can increase it by starting with a higher balance or making contributions throughout the year.

Start taking advantage of today’s high APY with one of the top savings rates available now

Bottom line

The Fed’s decision later this month could have a big impact on whether savers start earning 5% in their high-yield savings accounts in the near future. While it’s impossible to say exactly what the Fed might do, it doesn’t change anything The best way you can benefit From the high rate today. Open a high-yield savings account with a competitive interest rate now, and you can Higher rates are higher As long as possible, you’ll get an automatic bump if your bank raises its APY in the future.

Start saving more and see which of the best savings account rates is right for you