After pausing to raise federal interest rates in June, the Federal Reserve showed For more than two decadesin the target range of 5.25 to 5.50%.Again at its Federal Open Market Committee (FOMC) meeting this week. This will bring them to the maximum rate
While that means borrowing costs (loans, lines of credit, etc.) may soon rise again, that’s another. something Already earning Today, and can earn more soon. But this rate hike could also carry some important signals for savers going forward.
Find out how much more you can earn on your balance by comparing today’s top savings rates here.
How might another Fed rate hike affect savers?
Here are a few ways experts say another federal rate hike this week could affect your savings — andBy choosing the right savings option for you.
Higher savings interest rates
As we’ve seen in the past, there’s a good chance that banks will respond to another rate hike by raising the rate offered to savers.
“If the Fed raises short-term interest rates, it will raise yields on short-term accounts like high-yield savings and short-term CDs,” said Michelle Vargas, CFP, president of Waymaker Financial Planning.
Banks don’t directly tie their APYs to the Fed’s actions, but they tend to follow pretty closely. We have seen rate increases over the past few monthsAlong with the federal savings rate, banks compete with each other for your balance.
Compare some of the best savings rates available right now here!
Increases may be small
However, you should keep your expectations in balance. The Fed is only expected to raise rates by just a quarter of a percentage point, but it may be nearing the end of its rate hike campaign for some time.
“Another rate hike will probably encourage some banks to offer higher savings rates, but it’s unlikely to be a significant change,” says Mike Zeiter, CFP, owner and financial planner at Foundation Financial Planning. “Most banks are aware of the rate environment and know that the Fed is likely nearing the end of the rate hiking cycle.”
Fed officials said they were committed to assessing economic conditions at the meeting.
“Participants agreed that policy decisions at each meeting will continue to be based on the totality of incoming information and its implications for the economic outlook as well as the balance of risks.” Read the minutes of the June meeting. So if inflation continues and the job market strengthens, the Fed may be prepared to keep rates where they are.
If so, we probably already areBanks are willing to offer savers on their balances. You can make sure you’re still getting the best deal by looking at your existing high-yield savings accounts and comparing them with other options. Depending on the size of any rate increase, it may mean moving your balance elsewhere.
Why you should start saving now
While the Fed is likely to raise rates this time around, “it’s unlikely that we’ll see significant interest rate hikes for the rest of this year,” said Natalie Taylor, CFP, founder of Natalie Taylor Consulting Services, adding, “Previous interest rate hikes are beginning to show signs of significant progress in reducing inflation.”
As we approach the end of the rising interest rate cycle we are in, now is one of the best times.
For short-term balances you may need access to with little notice, a high-yield savings account has the flexibility while still offering great APY. These may be great for youor other savings goals. you can get With many of these accounts and some offering 5% right away.
Another detail to keep in mind is that high-yield savings accounts carry variable interest. If you open an account today with a competitive rate, your rate may automatically increase if the bank raises APYs after another rate hike. However, that doesn’t mean your current rate won’t last forever; When rates eventually drop, so can your APY. By starting to save sooner rather than later, you can take advantage of higher rates for as long as possible.
See how much you could earn with today’s top savings rates.
If the Fed implements another federal interest rate hike this week,Can go up, too. But it’s important for savers to know that we may be nearing the end of the current cycle of rate hikes. While the Fed may keep rates high for some time, it may pay to start contributing to a high-income account today so you have enough time. with interest earnings prior to changes in the rate environment.
Get started today by comparing some of the best savings rates here.