Will 2024 See Further Increases in Savings Rates?-FXOR

Will 2024 See Further Increases in Savings Rates?

2024-07-15

As the Federal Reserve increased interest rates throughout 2022-2023, the rates on high-yield savings accounts and CDs followed suit.

As the Federal Reserve increased interest rates throughout 2022-2023, the rates on high-yield savings accounts and CDs followed suit. However, since the Federal Reserve opted for a fourth consecutive meeting to maintain steady interest rates in January, savings rates have started to decline.

If the Fed proceeds with expected interest rate cuts later this year, savings rates are likely to decrease even further. Considering the ongoing downward trend in rates, it's advisable to lock in rates while they are still comparatively high.

To address inflation concerns, the Federal Reserve raised interest rates to curb spending. This led to higher commercial interest rates on mortgages, credit card APRs, and other loans for consumers.

A positive outcome emerged, though, as the federal funds rate increased, causing interest rates on high-yield savings accounts and CDs to rise, as is customary. Offering a competitive Annual Percentage Yield (APY) on accounts became a strategic way for banks to vie for customers and attract deposits.

In the most recent meeting, the Federal Reserve once again decided to keep the federal funds rate steady. This marks the fourth consecutive pause in rate hikes, keeping the federal funds rate, a pivotal bank lending rate, within a target range of 5.25% to 5.5%, the highest it has been in 23 years.

Despite three interest rate cuts in 2024 and a lowered median interest-rate projection for the end of 2024 to 4.6%, the anticipated first rate cut in March may not materialize, contrary to expert predictions.

According to the official statement from the Federal Reserve, "The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.

Tips on finding the best savings rates:

Compare High Yield Rates Online:

Online banks often offer more generous APYs on savings accounts.

Avoid Teaser Rates and Tiered Interest Rates:

Teaser rates are short-lived promotional rates used to attract new customers.

Opt for an account with a flat APY rather than tiered interest rates.

Consider Any Fees:

Some high-yield savings accounts may have fees or balance requirements that affect overall value.

List of high-yield savings accounts with their respective APYs, minimum opening deposits, and monthly fees:

Milli Bank: 5.50% APY; $0 minimum opening deposit; No monthly fee

Western Alliance Bank: 5.32% APY; $1.00 minimum opening deposit; No monthly fee

UFB Direct: 5.25% APY; $0 minimum opening deposit; No monthly fee