How the Election Will Affect Interest Rates
Updated
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Will interest rates respond to the election? It's hard to know for sure.
In the months leading up to the 2024 election, voters have questions. Will rates come down, making car loans cheaper? Will rates remain flat, keeping it pricey to finance homes? Or will rates climb even higher, making savings accounts even more profitable?
When we talk about interest rates, we speak of the cost of borrowing or lending money. Higher interest rates make it more expensive to borrow and more profitable to lend. When interest rates are low, the reverse is true. This has all sorts of consequences for your money.
Two rates to watch out for: the federal funds rate and the prime rate.
The Federal Reserve sets the federal funds rate, the rate financial institutions use when they borrow from each other. This rate influences all other rates.
Individual lenders set the prime rate. This is the rate financial institutions charge "prime" customers -- those with the highest credit scores. Typically, this rate is the federal funds rate, plus a percentage set by the lender.
Make sure you're getting the best account for you by comparing savings rates and promotions. Here are some of our favorite high-yield savings accounts to consider.
| Account | APY | Promotion | Next Steps |
|---|---|---|---|
Open Account for SoFi Checking and Savings
On SoFi's Secure Website.
Rating image, 4.50 out of 5 stars.
4.50/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair = Poor |
up to 3.80%²
Rate info
You can earn the maximum APY by having Direct Deposit (no minimum amount required) or by making $5,000 or more in Qualifying Deposits every 30 days. See SoFi Checking and Savings rate sheet at: https://www.sofi.com/legal/banking-rate-sheet.
Min. to earn: $0
|
New customers can earn up to a $300 bonus with qualifying direct deposits!¹
|
Open Account for SoFi Checking and Savings
On SoFi's Secure Website. |
Open Account for CIT Platinum Savings
On CIT's Secure Website.
Rating image, 4.50 out of 5 stars.
4.50/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair = Poor |
4.10% APY for balances of $5,000 or more
Rate info
4.10% APY for balances of $5,000 or more; otherwise, 0.25% APY
Min. to earn: $100 to open account, $5,000+ for max APY
|
Earn a bonus of at least $225 after a one-time deposit of $25,000+.
Transfer a one-time deposit of $25,000-$49,999.99 for a bonus of $225. Transfer a one-time deposit of $50,000+ for a bonus of $300. Account must be opened with code PS2025 while this promotion lasts, and funded within 30 days. Bonus will be fulfilled within 60 days from the funding date. There is no period of time where the customer will be required to maintain the funds. Account must be open when bonus is credited. One bonus per account and primary customer. Bonus will be credited into the Platinum Savings Account that fulfills the funding requirement. Funding can be deposited all at once or incrementally.
|
Open Account for CIT Platinum Savings
On CIT's Secure Website. |
Open Account for American Express® High Yield Savings
On American Express's Secure Website.
Rating image, 4.00 out of 5 stars.
4.00/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair = Poor |
3.70%
Rate info
3.70% annual percentage yield as of April 16, 2025. Terms apply.
Min. to earn: $0
|
N/A
|
Open Account for American Express® High Yield Savings
On American Express's Secure Website. |
SoFi disclosure:
¹ New and existing Checking and Savings members who have not previously enrolled in Direct Deposit with SoFi are eligible to earn a cash bonus of either $50 (with at least $1,000 total Direct Deposits received during the Direct Deposit Bonus Period) OR $300 (with at least $5,000 total Direct Deposits received during the Direct Deposit Bonus Period). Cash bonus will be based on the total amount of Direct Deposit. Direct Deposit Promotion begins on 12/7/2023 and will be available through 1/31/26. See full bonus and annual percentage yield (APY) terms at sofi.com/banking#1.
² SoFi members who enroll in SoFi Plus with Direct Deposit or by paying the SoFi Plus Subscription Fee every 30 days or with $5,000 or more in Qualifying Deposits during the 30-Day Evaluation Period can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. Members without either SoFi Plus or Qualifying Deposits, during the 30-Day Evaluation Period will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Only SoFi Plus members are eligible for other SoFi Plus benefits. Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet. See the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.
³ We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.
⁴ SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per depositor per legal category of account ownership, as described in the FDIC’s regulations.
Any additional FDIC insurance is provided by the SoFi Insured Deposit Program. Deposits may be insured up to $3M through participation in the program. See full terms at SoFi.com/banking/fdic/sidpterms. See list of participating banks at SoFi.com/banking/fdic/participatingbanks.
⁵ We’ve partnered with Allpoint to provide you with ATM access at any of the 55,000+ ATMs within the Allpoint network. You will not be charged a fee when using an in-network ATM, however, third-party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
⁶ Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.
⁷ Overdraft Coverage is limited to $50 on debit card purchases only and is an account benefit available to customers with direct deposits of $1,000 or more during the current 30-day Evaluation Period as determined by SoFi Bank, N.A. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the“30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Members with a prior history of non-repayment of negative balances are ineligible for Overdraft Coverage.
The Federal Reserve's role is to keep inflation within a 2% to 3% range. When inflation is too high, it raises interest rates. When there's large deflation, it lowers interest rates.
The Federal Reserve stimulates a sluggish economy by lowering interest rates. Banks can borrow from each other cheaply, and they can offer home buyers low mortgage rates. When the Federal Reserve slashed rates in 2020, many people took out mortgages.
The Federal Reserve cools down inflationary economies by raising interest rates. This makes it more expensive for banks to borrow from each other. It also makes APYs on bank accounts more profitable. Right now, the Fed is keeping rates high to cool inflation. Many people are taking advantage of high CD rates to open accounts.
The economy is complex. Banks and other financial institutions can offer you rates different from the federal funds rate.
Financial institutions set prime rates, which are influenced by the federal funds rate. The key word here is influenced. Banks and credit card companies set their own rates. So, Bank A may offer you a better savings account APY than Bank B.
Financial institutions balance offering you attractive rates -- therefore earning your business -- with making money. For example, online banks often give you the best interest rates on savings accounts. They want your business and pass on savings they earn from being online-only.
When Fed rates are high, institutions can pass these on to you via better APYs on bank accounts. But when rates are high, borrowing money becomes expensive.
When Fed rates are low like they were in 2020, institutions offer better rates on mortgages, credit cards, auto loans, personal loans, etc. But interest-bearing accounts earn less.
The Federal Reserve rarely changes the federal funds rate the year before the election, but it's possible. There are signs the Fed may cut rates once or twice in 2024. But, its stance on rate cuts has already changed more than once. Inflation is hard to predict, even for economists.
Rates may change as financial institutions anticipate policy changes and presidential election results.
What happened to the prime rate in the 12 presidential elections since 1972:
The market does not seem to care if the new president was a Democrat or Republican. What matters more is the current state of the economy and how it might react to the new president.
The Federal Reserve and financial institutions set our interest rates. It doesn't matter who is in the Oval Office. That said, the president can indirectly influence fed rates. They can do this by nominating members. They can also remove the Fed Chair, enact policies, and disagree with Federal Reserve decisions.
The president can appoint the Federal Reserve Chair and nominate all seven members of the Board of Governors. These are the people who make decisions. Their choices will ultimately affect your interest rates. Yet, each member serves a term of 14 years. A new one is appointed every two years. As a result, the current president's influence is limited. Besides, the Senate has to confirm each nominee -- further limiting the president's power. Finally, there are 12 Federal regional banks throughout the country. The president has no say in who runs these.
The president can remove the Federal Chair, but there would need to be a good reason for doing so. Disagreeing on policy doesn't count. This has never happened in U.S. history.
Presidential policies may indirectly prompt the Federal Reserve to raise or lower rates. The president can enact policies that make it easier or more difficult for citizens to spend and save. The Federal Reserve may change rates to keep the U.S. economy stable.
The Federal Reserve raised the federal funds rate in 2016, the year Donald Trump was elected President of the United States. It was no secret that Trump wanted corporate tax cuts. He also wanted to deregulate environmental and community protections. The Federal Reserve likely saw these cost-cutting measures as an indicator of short-term economic growth and raised the rate to keep that potential growth under control.
The president is free to disagree with Federal Reserve decisions. But the government can't force the Federal Reserve into or out of a particular course of action. The Board of Governors holds final authority over key strategic planning.
Rates are at historical highs. Inflation is no longer soaring. So, rates are unlikely to keep rising in 2024. The Federal Reserve is still keeping rates high to stop runaway inflation. But it's no longer signaling more rate hikes.
In fact, one or two rate cuts is possible. If the Federal Reserve lowers rates, loans will cost less. Bank accounts will pay less interest. It may be a good time to lock in rates by opening CDs. Should rates fall, many of us will benefit by refinancing loans -- myself among them.
Low interest rates are good for the following:
High interest rates are good for the following:
Not directly, no. The Federal Reserve is independent, though it is held accountable by the U.S. Congress. It submits bi-annual reports and often testifies before Congress.
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