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What the Fed Announced Today

In what was an all-but-certain move, the 澳洲幸运5官方开奖结果体彩网:Federal Reserve's rate-setting committee today announced its first cut to the 澳洲幸运5官方开奖结果体彩网:federal funds rate since March 2020, bringing the target range down to 4.75%–5.00%. That starts a new phase after an aggressive 澳洲幸运5官方开奖结果体彩网:inflation-fighting campaign of 11 rate increases from spring 2022 to summer 2023, and then a 14-month period of holding the Fed's benchmark at its highest level since 2001.

What was not certain, however, was how much the central bank would cut rates today. With no prior public comment from Fed members on the magnitude or pace of coming rate cuts, interest-rate traders were split on whether we'd see a modest cut of 0.25 percentage points or a bolder reduction of 0.50 points. The Fed 澳洲幸运5官方开奖结果体彩网:chose a 0.50-point decrease.

"The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance," the FOMC said in its statement. "In light of the progress on inflation and the balance of risks, the Committee decided to lower the target range for the federal funds rate by a 1/2 percentage point."

How the Fed's Moves Impact CD and Savings Rates

The federal funds rate has a direct impact on the interest that banks and credit unions are willing to pay for savings, money market, and 澳洲幸运5官方开奖结果体彩网:certificate of deposit (CD) accounts. When the Fed's benchmark rate is high, interest rates for bank customers are elevated as well. The reverse isꩵ true when the federal funds rate is low.

When interest rates are expected to go down, many banks and credit unions begin lowering CD rates in anticipation, without waiting for an official Fed move. That's because CDs offer you not just a rate today, but a future-rate guarantee—and institutions don't want to get locked into paying CD rates they'll regret months or years down the road. As a result, a gradual downward trend in 澳洲幸运5官方开奖结果体彩网:the best CD rates has been underway for several months already.

Savings accounts, however, behave a bit differently, since banks and credit unions can lower the 澳洲幸运5官方开奖结果体彩网:annual percentage yield (APY) on these accounts at the drop of a hat. Without being constrained by the rate commitment a CD offers, 澳洲幸运5官方开奖结果体彩网:high-yield savings account rates tend to follow the trend of the fed funds rate for a longer time. As you can see, th🅠e best savings account rate hit a peak of 5.55% in April, and still sits at 5.50% today.

What's true in both cases, however, is that today's large Fed rate cut will have a significant impact on savings and CD rates. Banks and 澳洲幸运5官方开奖结果体彩网:credit unions knew a rate reduction would be coming today, but many 𓂃of them were no doubt waiting to see the magnitude of the cut before making their next rate decision. Now that the news is⛦ in, we expect the best savings account and CD rates to start coming down more quickly.

The Fed Is Forecasting More Cuts In🐼 2024—and 2025

Unfortunately for savers, savings and CD rates could experience more than just near-term rate adjustments—and could instead be headed toward a long downward slide. That's because today's Fed rate cut is expected to be the first in a series.

Every three months, the Fed's rate announcement includes a "Summary of Economic Projections." The latest installment was released today, and all eyes are on the "dot plot" forecast it contains. The chart is so-named because it represents each 𝔉Fed committee member as a nameless dot and lays out on a graph where each predicts the federal funds rate will be at the end of this year and into the future.

Today's dot plot shows that across the 19 Fed committee members, the median projection is for an additional 0.50-point rate cut in the final meetings of this year, for a total 2024 reduction of 1.00 percentage point.

Projecting further into the future, Fed committee members also predict a full percentage point of reductions in 2025. If that comes to fruition, it would result in a 2-point cut from the peak rate.

Get a High CD or Savings Rate While You Can

Though it's true that CD and savings account rates will decline as a result of the Fed's interest-rate cuts, it's also true that the rates they're currently paying are exceptionally high in a historical sense. As you can see below, today's top CD rates across terms range from 4.32% to 5.25%. Compare that to early 2022, when the most you could earn from the very best CDs in each term ranged from just 0.50% to 1.70% APY.

Similarly, if the best savings account rate🎃 falls half a percentage point in the coming weeks, or even a full percentage point by the end of the year, you could still be earning 4.50% or better, which is far above the 0.70% rate that was available from the nation-leading savings account in early 2022.

So what to do with your savings now? If you want to make sure you can get at your cash easily, putting it in one of the 澳洲幸运5官方开奖结果体彩网:best high-yield savings accounts is still a smart move. The 🌊sooner you get it into a top-paying account, the sooner (and longer) you'll be able to earn sizable interest payments.

But if you can commit to not touching some of your money for months or even years, it's also still worth considering a CD for some of your savings. While rates of future CDs will fall as the fed funds rate comes down, a CD you open now will have a guaranteed rate that can't be changed. By shopping our daily ranking of the 澳洲幸运5官方开奖结果体彩网:best CD rates, you can lock in a rate of 5.00% to 5.25% for short- and mid-term CDs (3 to 18 months🐻), or something in the m𓆏id- to upper-4.00% range for longer terms.

Since CD rates are fixed and guaranteed, and because the Fed's benchmark interest rate is expected to keep moving down, today's CD returns are expected to significantly out-pay the rates you'll be able to earn on savings accounts and new CDs in the rest of 2024 and probably 2025. So it's a good time to lock in one of today's great rates while you can.

How We Find the Best Savings and CD Rates

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), an🎉d the account's minimum initia🙈l deposit must not exceed $25,000.

Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, 澳洲幸运5官方开奖结果体彩网:read our full methodology.