How the Fed’s Next Action May Affect Your Savings Account Rates

10 in a row Increase in interest rates Over the past few months, the Federal Reserve will meet again this week to decide where interest rates will go next.

As early as 2022 it could be the first time since it started raising rates, the Fed Ready to take a break – At least temporarily. Fed Chair Jerome Powell reiterated The Fed’s last decision is within weeks of whether the committee will make future rate changes on a “meeting-by-meeting” basis, “based on the totality of incoming data.”

During the ongoing rate hikes so far, which have raised interest rates from nearly zero to more than 5%, one group has benefited: savers. Today, savers can earn 4% to 4.5% on their balance High Yield Savings Account.

But with just days to go before the Fed’s next decision, could savers be in store? Here’s how savings rate May affect whether rates rise again or stay the same.

Start maximizing your balance now with the best savings rates.

How the Fed’s Next Action Could Affect Savings Account Rates

Savings Account Rate Indirectly linked to the federal funds rate range set by the Fed. Variable interest rates on these accounts can go up or down depending on how federal interest rates move. Here’s what could happen to your savings rate after this week’s Fed decision.

If there is a rate break

The Fed began raising rates as early as 2022 as a way to combat runaway inflation, and recent data showed inflation It’s getting cold At the same time an increase in anxiety The coming recession.

This, combined with Statements from Fed officials, increased the likelihood of a rate pause, or “skip,” in June, allowing more time for the effects of rate hikes to fully play out. But that doesn’t mean savers should worry. A pause in rate hikes doesn’t mean your savings account rates will be lower. In fact, if the Fed funds rate range is above 5%, you’ll probably see that Today’s high rates on savings accounts.

In the longer term, however, the Fed indicated that it could do with rate hikes — or even prepare to lower interest rates — ultimately leading to lower rates for savers. “Rates could go down over the next 12 months and if the Fed pauses or starts signaling that they will actually be hiked,” says Rick Valenzi, CFP, founder of FinancialZane.

In the meantime, you can make the most of today’s high savings account rates for as long as possible Get started now by comparing the best rates available to maximize your savings

If there is another rate increase

Despite positive signs in recent months, inflation is still above the Fed’s 2% target. and overall signals from Fed officials has been mixed In recent weeks, leaving the door open for another potential rate hike.

If there is another interest rate hike — or if the Fed avoids a rate hike this month before raising rates again in July — it could mean little. Higher rates for saversagain

“We’ve probably reached peak rates on savings accounts,” said Gregory Crofton, CFP, founder of Adap Tax Financial. “If the Federal Reserve raises rates further, expect the savings rate to rise modestly, so it could peak at around 5%.”

Today, only a select few savings accounts earn close to 5% APY, many of which are among the top high-yield savings accounts. 4% and 4.5% APY.

Still, it’s important to remember that these rates won’t last forever. By taking advantage sooner rather than later, you can Not most High yields while you can and increase your balance before rates move down again.

Bottom line

The Fed’s next rate decision may still be up in the air, but there is one way you can guarantee a profit. Start saving in a high-yield savings account from today Increase your savings balance And set yourself up to benefit from higher rates for as long as possible.

You can make sure you have a fully stocked emergency fund and start saving for other short-term goals by using your high-yield savings account by increasing your contributions and keeping an eye on your budget. “Whether rates are paused or raised, savers need to stay focused on saving and investing,” says Eric Laub, CFP, founder of Finance 180.

Find out how you can earn more with today’s best savings account rates.