If you have money in a savings account, you’ve probably noticed that you’re not earning as much on your balance lately.Earlier this year, it was possible to earn an annual percentage yield (APY) as high as 5%. Now, the top savings account rates hover around 4% APY. And they’re still falling.Will that trend continue? There’s no telling exactly how the Fed will adjust rates moving forward, but here’s how the Fed’s decisions impact interest rates and whether savings rates will go up or down at all this year.Savings account rates are variable, meaning they can increase or decrease at any time. And because banks are private businesses, they can set their rates as they see fit.For example, banks may raise interest rates on savings accounts to attract new customers and increase cash reserves. On the other hand, if there’s less demand for loans, banks don’t need as much deposit capital, so they might lower savings rates to reduce the expense of paying interest.However, savings rates are also influenced by other factors, including the federal funds rate — the rate at which banks lend to each other to meet reserve requirements.Read more: How do banks set their savings account interest rates?The Federal Reserve sets the federal funds rate. Certain members of the Fed, known as the Federal Open Market Committee (FOMC), meet eight times per year to discuss whether to adjust the federal funds rate to meet its economic objectives.One of those objectives is to maintain an inflation rate of about 2% — the rate that experts believe is consistent with pricing stability, positive employment rates, and economic growth.When inflation is high, the Federal Reserve often hikes the federal funds rate to make lending between banks more expensive and slow economic growth. As a result, other bank product rates follow suit; interest rates on loans generally increase, along with the APYs on deposit products.If the Fed wants to stimulate the economy, it will lower the federal funds rate, making it easier to borrow money. But that also means savers will earn less on their deposits.Read more: Is ‘rate chasing’ worth it? Savings interest rates today, December 29, 2024 (best accounts offering 4.35% APY) Money market account rates today, December 29, 2024 (best account provides 5.00% APY) CD rates today, December 29, 2024 (up to 4.25% APY) Interest rates on savings accounts remain elevated by historical standards. The national average savings account rate is currently 0.43%, which is nearly seven times higher than the average rate in 2022.That’s thanks, in large part, to a series of interest rate hikes by the Fed to combat skyrocketing inflation. The target range for the federal funds rate increased from 0.25%-0.50% in January 2022 to 5.25%-5.50% in July 2023.The Fed maintained that target range until September 2024, when it announced a cut of 50 basis points. The Fed then implemented another 25 basis point cut in November. Currently, the target range
Mar. Gen 7th, 2025
