After cutting interest rates at its last three meetings, the US Federal Reserve opted to pause rates today, keeping them at a target range of 4.25% to 4.5%. In its postmeeting statement (PDF), the Fed noted that “economic activity has continued to expand at a solid pace,” but “the economic outlook is uncertain.” Pausing rates allows the Fed to see how factors like the new administration’s policies affect inflation and other economic indicators.That’s good news for savers, who can still take advantage of certificate of deposit and savings account rates as high as 5% annual percentage yield, or APY.”I expect CD and savings rates to hold steady where they are currently while the dust settles a bit,” said Dana Menard, founder of Twin Cities Wealth Strategies.Here’s what you need to know about how the Fed’s latest decision affects your savings — and what you should do to maximize your money now.How the Federal Reserve influences deposit ratesThe Fed meets eight times a year to assess the health of the US economy and vote on the federal funds rate, the rate banks use to lend and borrow money. While the Fed’s decision to change rates doesn’t directly affect savings rates, changes in APYs typically follow. The changes can take several weeks or even months to take effect.Although some banks set their deposit account APYs according to the direction of the federal funds rate, timing and specific rates may vary. “Some big banks are swimming in deposits and they don’t need to pay up to bring in more,” said Greg McBride, chief financial analyst at Bankrate.As such, there may be dramatic differences in account interest rates from bank to bank. “People should shop around, and they shouldn’t just shop around today; they should shop around a week from now, a month from now and three months from now,” said Gary Zimmerman, CEO of MaxMyInterest.The Fed paused rates. Now what?Jordan Gilberti, senior lead planner at Facet, recommends preparing for the worst-case scenario when thinking about strategies for growing your savings, whether you’re setting aside cash for an emergency or building a sinking fund. Now that rates are on pause, purchasing a CD or moving your money to a high-yield savings account as soon as possible is the best way to maximize your interest earnings.”For savers, it’s probably a good idea to lock in a higher rate now if you’re looking at longer-term CDs,” said Taylor Kovar, CEO of 11 Financial. “If you want more flexibility, short-term options might make sense in case rates shift again.”You can also consider building a CD ladder, suggests John Buran, CEO of Flushing Financial, the parent company of Flushing Bank. This strategy allows you to take advantage of still-high interest rates in the short term, but also lock in rates for the long term in case APYs continue to drop.The best savings accounts to open nowUnderstanding the pros and cons of each deposit account type can help you make the best choice for your needs.Traditional savings accountsMos
Ven. Gen 31st, 2025
