Here's One Benefit to Interest Rates Staying Unchanged for Now
KEY POINTS
- The Federal Reserve recently decided to keep interest rates steady, meaning the federal funds rate will remain unchanged.
- Some consumers were hoping for rate reductions to lower borrowing costs.
- Unchanged rates aren't all bad news -- savers can continue to benefit from steady interest rates.
The Federal Open Market Committee (FOMC) meets throughout the year to make important decisions that impact the U.S. economy. In the most recent meeting, held at the end of July, the committee decided to keep the Federal Reserve's benchmark rate the same.
The Federal Reserve's interest rate, or the federal funds rate, is the rate at which credit unions and banks borrow and lend money to each other. The target range for the federal funds rate will remain 5.25% to 5.50%. While this decision is disappointing news for those who hoped to see lower interest rates for loan products like auto loans and mortgages, it's good news for savers.
Savers can continue to benefit
If you've got money in a high-yield savings account, you'll likely benefit from the FOMC's recent decision regarding the federal funds rate. Since rates remain unchanged for now, it's likely that the interest rate for your bank account will also remain steady.
It's worth mentioning that banks can change interest rates at any time. However, banks often look to the current federal funds rate when deciding interest rates for consumer banking products. While there's no direct correlation between the federal funds rate and consumer interest rates, it can impact whether banks increase or reduce interest rates.
Our Picks for the Best High-Yield Savings Accounts of 2024
| Product | APY | Min. to Earn | |
American Express® High Yield Savings
Member FDIC.
APY
3.80%
Rate info
3.80% annual percentage yield as of January 9, 2025. Terms apply.
Min. to earn
$0
Open Account for American Express® High Yield Savings
On American Express's Secure Website. |
3.80%
Rate info
3.80% annual percentage yield as of January 9, 2025. Terms apply.
|
$0
|
Open Account for American Express® High Yield Savings
On American Express's Secure Website. |
Capital One 360 Performance Savings
Member FDIC.
APY
3.80%
Rate info
See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.
Min. to earn
$0
Open Account for Capital One 360 Performance Savings
On Capital One's Secure Website. |
3.80%
Rate info
See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.
|
$0
|
Open Account for Capital One 360 Performance Savings
On Capital One's Secure Website. |
Western Alliance Bank High-Yield Savings Premier
Member FDIC.
APY
4.40%
Rate info
The annual percentage yield (APY) is accurate as of Jan. 2, 2025, and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.
Min. to earn
$500 to open, $0.01 for max APY
Open Account for Western Alliance Bank High-Yield Savings Premier
On Western Alliance Bank's Secure Website. |
4.40%
Rate info
The annual percentage yield (APY) is accurate as of Jan. 2, 2025, and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.
|
$500 to open, $0.01 for max APY
|
Open Account for Western Alliance Bank High-Yield Savings Premier
On Western Alliance Bank's Secure Website. |
When the federal funds rate is high, it can lead to banks increasing interest rates. So, since the federal funds rate isn't changing, those with cash in an interest-earning bank account can continue to benefit from those higher interest rates.
If you don't yet have a high-yield savings account, you may want to consider moving your savings into one so you can maximize the interest you earn. Most checking accounts don't earn interest, so keeping savings in your checking account won't benefit you. You can review our list of the best high-yield savings accounts to learn more.
Bad news for borrowers
While savers can continue to benefit, those hoping to take out a loan soon are at a disadvantage. Until the federal funds rate is lowered, borrowers taking out mortgages and other loans may end up with an interest rate that is higher than they'd prefer.
Higher interest rates results in more interest being paid throughout the life of the loan. But interest rates won't remain unchanged forever. The FOMC will meet again in a few weeks, so it's possible that the rate will be reduced then.
The committee released a statement after the most recent meeting, noting that there has been progress in recent months. However, the committee is committed to returning to a 2% inflation goal. Until that happens, there's no plans to cut rates.
The committee meets again Sept. 17-18. After that meeting, another statement will be released regarding the federal funds rate. For now, we will have to wait and see.
Continue to work on your financial goals
When we don't have control over a situation, like interest rates, it can feel frustrating. But we can put our energy and focus into what we can control. Regardless of where interest rates stand right now, it's important to keep working hard to meet your financial goals.
Making any progress toward achieving your goals is a major win for your financial future.
Our Research Expert
Natasha is a freelance writer who specializes in personal finance, credit card, credit card rewards, and travel hacking content.
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