What interest rates are doing today
Interest rates are set by the Federal Reserve, which raised them sharply between 2022 and 2023 to fight inflation, then paused increases in mid-2023. As of late 2024, the Fed has begun cutting rates again, though the pace and timing of future cuts remain uncertain. The exact rate your bank pays you on savings depends on what the Fed does next, but it also depends on what your bank decides to do with that rate.
When the Fed raises its benchmark rate, banks usually raise what they pay on savings accounts and money market accounts within weeks. When the Fed cuts rates, banks often cut what they pay you more slowly—sometimes taking months. This delay means the timing of when you open an account matters, because rates can shift before your money settles in.
Key Takeaways
- The Federal Reserve controls the benchmark rate that influences what banks pay on savings, and it has cut rates multiple times since mid-2024 after holding them steady for over a year.
- Banks do not have to match the Fed's moves exactly or at the same speed—some raise rates quickly when the Fed moves up, but cut more slowly when the Fed moves down.
- High-yield savings accounts and money market accounts currently offer higher rates than traditional savings accounts, but those rates will fall as the Fed continues cutting.
- The rate you see advertised today may not be the rate you earn six months from now, so locking in a rate through a certificate of deposit (CD) protects you if rates keep falling.
- Your bank's stability and insurance coverage matter more than chasing the highest advertised rate, because a bank failure means losing access to your money.
Why the Fed's decisions affect what you earn
The Federal Reserve does not directly set the interest rate your bank pays you. Instead, it sets the federal funds rate—the rate banks charge each other for overnight loans. When that rate goes up, banks have to pay more to borrow money, so they raise what they pay depositors to attract savings. When that rate goes down, banks can borrow more cheaply, so they lower what they pay you.
This connection is not automatic. A bank could theoretically keep paying high rates even after the Fed cuts, if it wanted to attract more deposits. In practice, banks lower rates because they need less money from savers when borrowing costs fall. The lag between a Fed move and a bank's response can be weeks or months, which is why timing matters when you open a new account.
How current rate cuts affect savings accounts
Since the Fed began cutting rates in September 2024, high-yield savings accounts have dropped from around 5.25% to 4.5% to 4.75% depending on the bank, with further cuts likely as the Fed continues. Traditional savings accounts at large banks have stayed near 0.01% because those banks rarely raised them much during the rate-hiking period. Money market accounts have fallen in parallel with high-yield savings, since they track the same Fed benchmark.
The rate you see advertised right now is not may provide to stay the same. Banks can change rates daily, and most do. If you see a rate you like, moving money into that account within days makes sense, because the rate could be lower by next week. However, chasing the absolute highest rate by switching banks repeatedly costs time and may trigger fees if you withdraw before a minimum holding period.
Certificates of deposit lock in a rate for a set time
A certificate of deposit (CD) is a savings product where you agree to leave money untouched for a set period—usually three months to five years—in exchange for a fixed interest rate. That rate does not change, no matter what the Fed does. If you open a one-year CD at 4.5% and the Fed cuts rates next month, you keep earning 4.5% for the full year.
The trade-off is access. If you need the money before the CD matures, you pay an early withdrawal penalty, which is usually a few months of interest. This makes CDs useful if you know you will not need the money for a specific period and want to protect yourself against falling rates. It makes them risky if you might need the cash sooner.
CD rates vary by bank and by term length. A three-month CD might pay 4.0%, while a five-year CD at the same bank might pay 3.8%, because the bank is less certain about rates that far out. Shopping across banks for CD rates takes minutes online and can mean the difference between 4.2% and 3.9% on the same term.
What happens if rates keep falling
If the Fed continues cutting rates through 2025, the rates banks pay on savings will continue falling. A high-yield account paying 4.5% could pay 3.5% by mid-2025 if the Fed cuts aggressively. This does not mean you lose money—you still earn interest on what you have saved—but your earnings slow down. Money sitting in a traditional savings account earning 0.01% will not improve much either way.
Falling rates also mean that if you need to borrow—for a car loan, mortgage, or credit card—those rates will fall too. The benefit of lower rates on debt can outweigh the cost of lower rates on savings, depending on your situation. If you have high-interest credit card debt, you benefit more from lower rates than you lose on savings.
What happens if rates rise again
If inflation picks up and the Fed raises rates again, banks will raise what they pay on savings accounts. High-yield accounts could return to 5% or higher. However, if you locked money into a CD at 4.0% before rates rose, you would be stuck earning 4.0% while new CDs pay 5.5%. This is the risk of CDs—they protect you if rates fall, but they lock you out of higher rates if rates rise.
The Fed does not announce rate moves far in advance. It makes decisions at scheduled meetings eight times a year, and markets react immediately. You cannot predict with certainty whether rates will rise or fall next, which is why diversifying across different account types and terms makes sense. Putting some money in a high-yield account (flexible, adjusts with rates) and some in a CD (locked in, protected from falling rates) balances the two risks.
How to find the rates your bank is actually paying
The rate advertised on a bank's homepage is usually accurate, but it applies only to new deposits. Some banks pay different rates depending on your account balance—a high-yield account might pay 4.5% on balances under $100,000 and 4.3% on larger balances. Read the fine print or call the bank to confirm what rate applies to your specific situation.
Websites like Bankrate, DepositAccounts, and the Federal Deposit Insurance Corporation (FDIC) list rates from multiple banks side by side. These sites update daily, so a rate you see in the morning might be lower by evening. If you find a rate you want, open the account the same day rather than waiting, because rates can change without notice.
Your bank's stability matters more than a 0.1% difference in rate. A bank insured by the FDIC protects your money up to $250,000 per account type, even if the bank fails. Smaller online banks often pay higher rates because they have lower overhead, but they are only safe if they are FDIC-insured. Check the FDIC's bank search tool before opening an account at an unfamiliar bank.
Frequently Asked Questions
Will interest rates go back up?
The Fed may raise rates again if inflation returns, but there is no way to know when or by how much. The Fed meets eight times a year to decide, and it does not announce decisions in advance. If you are concerned about rates rising, locking money into a CD protects you, but you give up the ability to move money if you need it.
Should I move my money to a high-yield account right now?
If your current account pays less than 1%, moving to a high-yield account earning 4.5% or more makes sense, even if rates are falling. The difference in earnings is real money. However, moving money repeatedly to chase the highest rate by 0.1% costs time and may trigger fees, so pick a stable bank and stay put unless rates drop significantly.
What is the difference between a money market account and a high-yield savings account?
Both track the Fed's rate closely and pay similar amounts. Money market accounts usually require a higher minimum balance and may offer check-writing or debit card access. High-yield savings accounts are simpler—you deposit, earn interest, and withdraw when you need the money. Both are FDIC-insured up to $250,000.
Is it too late to open a CD if rates are falling?
It depends on how long you can leave the money alone. If you will not need it for two years, locking in the current rate protects you if rates fall further. If you might need it within six months, a CD's early withdrawal penalty could cost you more than you gain from the higher rate. A high-yield account gives you flexibility if you are unsure.
Why does my bank pay less than other banks?
Large banks often pay less because they have many branches and do not need to attract deposits aggressively. Online banks and smaller regional banks pay more because they have lower costs and compete on rate. Your bank's size and business model determine how much it pays, not the Fed's rate alone. Shopping around takes minutes and can save you hundreds of dollars a year.