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What Did the Fed Say Today?

As most people expected, of the Federal Reserve The rate-setting committee announced this afternoon that it will cut interest rates federal funds rate It increased the target range by another 0.25 percentage points, lowering it to 4.50%-4.75%. This is the second consecutive meeting in which the central bank has cut its benchmark interest rate; A larger half-point cut was announced on September 18.

Previously, the Fed had implemented a historic interest rate hike campaign to combat the highest rates seen in decades. inflation. The rise, which consisted of 11 interest rate increases between March 2022 and July 2023, increased the Fed funds rate by a cumulative 5.25 points, bringing it to its highest level since 2001.

Now that inflation has cooled, the Fed has moved to lower the federal funds rate. In its official statement today, the Fed said the 0.25-point gradual reduction occurred considering that unemployment and inflation risks are “roughly balanced” but the inflation rate is still slightly above the Fed’s 2% target. The Fed also stated, as it often does, that the rate-setting committee will make future decisions on a meeting-by-meeting basis.

“The committee will carefully consider incoming data, the evolving outlook, and the balance of risks when considering additional adjustments to the federal funds rate target range,” the Fed said in its statement. he said. Returning employment and inflation to the 2 percent target.”

Will There Be More Fed Cuts in 2024 and 2025?

The Fed published its quarterly report at its September meeting.dot chart” The forecast is so named because it represents each Fed committee member as an anonymous dot on a chart where each predicts the federal funds rate will be at the end of this year, next year, and two years from now. No dot The issue was announced at the November meeting However, below you can see the predictions of the Fed committee members on September 18.

Federal Reserve Chairman during regular post-announcement press conference Jerome Powell He was asked whether the committee would stand by its September forecasts for another rate cut in December, followed by possibly a full point cut in 2025. Powell stated that he could not speak to committee members because they did not meet their current expectations. Dot plot prediction in this meeting.

“For December – hour Each “We will look at the data coming in at the meeting and how it affects the outlook,” Powell said, later adding: “We are on the path to a more neutral stance. This situation has not changed since (the September projection). “We’ll have to see where the data takes us.”

But we can look at Wall Street’s predictions. according to CME Group’s FedWatch ToolApproximately 75% of Fed fund futures investors believe that the Fed will implement another 0.25 point rate cut at its December 18 meeting. And by the end of 2025, more than three-quarters of investors predict we will see another decline of 0.50 to 1.00 points.

How Will This Affect Savings and CD Rates?

The Federal Reserve itself does not set consumer interest rates. But the level it sets for the federal funds rate directly affects the interest banks and credit unions are willing to pay on savings, money market and credit unions. certificate of deposit (CD) accounts. When the Fed’s benchmark interest rate is high, interest rates for bank customers also rise. The opposite is true when the federal funds rate is low.

When interest rates are expected to fall, many banks and credit unions Lower CD rates in anticipation, without waiting for the Fed’s next official move. That’s because CDs give you a guarantee of not just a rate today, but a rate for the future, and institutions don’t want to be stuck paying CD rates they’ll regret down the road. As a result we saw this best CD rates It has been declining for almost a year and this trend is expected to continue.

Savings account rates behave a little differently. Savings accounts are exempt from the rate commitment that a CD offers, since banks and credit unions can lower these rates immediately. In conclusion, high yield savings account Interest rates are less likely to move before changes in the Fed funds rate.

Are High-Yield Savings Accounts and CDs Still Worth It?

While it is true that savings and CD rates will continue to fall as a result of today’s Fed move and will likely continue to fall if the central bank implements additional interest rate cuts, it is also true that it always makes sense to earn a competitive rate no matter what. right now.

So if you have cash stashed away in a bank account that pays little or nothing, moving it into a high-yield savings account will start providing monthly interest payments that essentially amount to free money. And the sooner you switch to one of today’s best high yield savings accountsThe sooner you start using your savings.

Also, if you can commit to not touching some of your money for months or even years, consider buying a CD. Although savings account rates will decline along with the federal funds rate, a CD you open now will have a guaranteed rate that cannot be changed. Shop our daily rankings best CD ratesYou can choose from dozens of options that pay 5% or better on maturities through 2025, or in the 4% range for CD rate locks that extend through 2026, 2027, or even 2029.

But don’t delay, because tomorrow the current APYs on CDs could be worse than today, and any CD offerings could possibly evaporate overnight. Therefore, as soon as you find the best offer you like, lock it so that you can enjoy this rate in the future.

How Do We Find the Best Savings and CD Rates?

Investopedia tracks rate data for more than 200 banks and credit unions offering CDs and savings accounts to customers nationwide each business day and determines daily rankings of the highest-paying accounts. To qualify for our listings, the institution must be federally insured (FDIC for banks, NCUA for credit unions) and the account’s minimum initial deposit must not exceed $25,000.

Banks must be present in at least 40 states. Although some credit unions require you to donate to a specific charity or association to become a member if you do not meet other eligibility criteria (for example, you do not live in a certain area or are not employed in a certain job), we exclude credit unions with a donation requirement of $40 or more. For more information about how we choose the best odds, Read our full methodology.