Will Savings Rates Keep Going Up in 2024?: In the face of declining savings rates, it’s advisable to secure favorable rates while they’re still elevated.
Will Savings Rates Keep Going Up in 2024?
As the Federal Reserve pushed interest rates upwards throughout 2022-2023, high-yield savings accounts and CDs witnessed a concurrent increase in rates. However, with the Federal Reserve opting to maintain interest rates at a consistent level, as evident from the fourth consecutive meeting in January, savings rates have begun to decline. Anticipating a potential interest rate cut later in the year, it is likely that savings rates will further decrease. As rates continue their descent, it’s recommended to consider locking in rates while they remain relatively high.
In response to inflationary pressures, the Federal Reserve raised interest rates to curb spending. This move resulted in higher commercial interest rates on mortgages, credit card APRs, and other loans. The positive outcome was that as the federal funds rate rose, so did the interest rates on high-yield savings accounts and CDs, following a typical pattern. Offering an attractive Annual Percentage Yield (APY) on accounts serves as an effective strategy for banks to compete for customers and attract deposits.
However, in its latest meeting, the Federal Reserve decided to maintain the federal funds rate at the current level. This fourth consecutive pause in rate hikes means the federal funds rate, a pivotal bank lending rate, will persist within a target range of 5.25% to 5.5%, marking the highest level in 23 years. Despite three interest rate cuts in 2024, as observed in December, the Federal Reserve adjusted its median interest-rate projection for the end of 2024 to 4.6%. The initial rate cut, previously predicted for March by many experts, is not expected to materialize.
According to the official statement, The Federal Reserve noted: “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.”
How to identify optimal savings rates
- Compare online high yield rates: Online banks commonly offer more attractive APYs on savings accounts, making online banking a viable option to secure the best savings rate. Transitioning from a traditional savings account at a brick-and-mortar bank to an online counterpart could prove beneficial.
- Steer clear of teaser rates and tiered interest rates: Teaser rates, used as promotional tools by banks to attract new customers, are typically short-lived. Opting for an account with a flat APY might be more favorable, especially if you plan to utilize your savings. Tiered interest rates, which pay different yields based on the account balance, may not be the most advantageous choice in the long run.
- Consider associated fees: While high-yield savings accounts offer above-average APYs on deposits, some may come with fees or balance requirements that can impact their overall value. It’s crucial to take these factors into account when searching for the best savings options.
Check out some noteworthy high yield savings accounts:
- Poppy Bank: 5.50% APY; $1,000 minimum opening deposit
- My Banking Direct: 5.35% APY; $500 minimum opening deposit
- Ivy Bank: 5.30% APY; $2,500 minimum opening deposit
- TAB Bank: 5.27% APY; $0 minimum opening deposit
- UFB Direct: 5.25% APY; $0 minimum opening deposit
- Newtek Bank: 5.25% APY; $0 minimum opening deposit
I hope this article on Will Savings Rates Keep Going Up in 2024? has been helpful. If you have any further questions, please feel free to leave a comment below.