After more than a year of steady rate hikes to tamp down record-high inflation -- and one brief pause in June -- the Federal Reserve is back at it this week. And despite an uptick in inflation last week, experts do not expect the Fed to raise rates this month. But experts say savings rates will remain high.
“There is still a long way to go before we see inflation back at the Fed’s ideal target of 2%,” said Leslie Tayne, founder of Tayne Law Group. “However, the Fed may need more time to see how its monetary policy decisions thus far will play out and ensure it doesn’t overcorrect.” Tayne added that pausing rate hikes Wednesday will give the Fed a new baseline to better calculate its next steps.
But pausing rates doesn’t mean savings rates will drop. A rate pause isn’t the same as a rate cut, so it’s likely banks will still keep deposit rates high, Tayne said. Let’s take a look at where savings rates are at this week and what another rate hike pause could mean for savings rates, according to the experts.
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CD rates remain high
While it’s unlikely CD and savings rates will start to drop following a potential rate hike pause, deposit rates are set by the individual bank according to their particular business needs. “Some banks may lower rates if they’re located in a less competitive market or don’t need as much cash on deposit,” Tayne said. But rates for certificates of deposit are still high, in line with most expectations leading up to Wednesday’s meeting.
Most CD rates remain the same, based on the banks we track at CNET. Long-term CDs, including 18-month, two-year and three-year CDs, saw small gains this week, with average APYs inching up to 5.00%, 4.44% and 4.29%, respectively. Short-term CDs (one year or less) also saw minimal gains, with one-year CDs marking the most notable change. For example, Barclays Bank increased its one-year CD from 5.00% to 5.15%, and CFG Bank increased its one-year CD from 5.60% to 5.67%.
Savings rates remained unchanged -- with one exception
Most banks and credit unions have saving rates over 5%, and they haven’t changed much, which echoes what experts expect leading up to Wednesday’s FOMC meeting. Only one bank has increased its savings rate: Synchrony increased its rate from 4.50% to 4.75%. Newtek Bank and UFB Direct both offer 5.25%, the highest rate on our list consistently for the last few weeks.
Like CDs, HYSA rates remain high but remain fairly level, with CNET’s weekly HYSA average increasing to 4.78%.
Note: Last week, we added a handful of additional banks offering high-yield savings accounts to our CNET tracker.
The Fed meets this week: What does another rate pause mean for your savings?
The next Federal Open Market Committee meeting is Wednesday. And despite the past two months of upward-trending inflation, the Fed is likely to press pause this week, suggests Thomas Brock, a chartered financial analyst at Annuity.com.
“We don’t anticipate a rate hike and that the Fed will opt to take the time to assess the cumulative impact of past rate increases,” said Adrian Cronje, economist and chief executive officer at Balentine.com.
Though the Fed doesn’t directly influence deposit account rates, annual percentage yields tend to mirror changes in the target federal funds rate. However, if the Fed decides to pause this week, deposit accounts are likely to remain high. When the Fed held interest rates steady in June, banks continued to offer high rates on deposit accounts, added Jeff Rose, a certified financial planner at Good Financial Cents. A few accounts even raised rates.
“But we also do not expect interest rate cuts to be happening any time soon,” Rose said. “It will be a pause, not a pivot.”
If the Fed decides to pause, certificates of deposit and high-yield savings account yields will likely remain stable until the Fed makes its next move in November. And if banks are eager to increase competition and open more deposit accounts, it’s possible some savings account and CD rates will climb.
That means there’s still time to take advantage of savings rates if you haven’t already. But before opening a new bank account, be sure to compare rates, fees and other requirements to find the right fit for your money.
How we calculate CNET’s weekly savings averages
CNET Money tracks top-yielding CDs and high-yield savings accounts weekly. We focus on banks with competitive APYs, minimum barriers to open an account, and low or no fees.
We track CD rates for the following banks: Alliant Credit Union, Ally Bank, American Express, Barclays, Bask Bank, Bread Savings, Capital One, CFG Bank, CIT, Forbright, Marcus by Goldman Sachs, MYSB Direct, Quontic, Rising Bank, Synchrony and EverBank.
We track HYSA rates for the following banks: Newtek Bank, UFB Direct, RBMax, Upgrade, Premier, CIT Bank, TAB Bank, Laurel Road, Varo, Bask Bank, CommunityWide Federal Credit Union, Bread Savings, Dollar Savings Direct, My Banking Direct, BMO Alto, CIBC Bank, EverBank, Synchrony, Quontic Bank, LendingClub, Rising Bank, Citizens, Barclays, Capital One, Discover, Marcus by Goldman Sachs, Ally and American Express.