What the Fed’s Rate Cut Means for Your Savings
The Federal Reserve cut its benchmark rate by a quarter point this week—its first reduction of 2025 after holding rates steady for five straight meetings. This move restarts the Fed’s rate-cutting cycle and has direct implications for savers.
How the Rate Cut Affects You
The federal funds rate influences what banks and credit unions pay on:
- Savings accounts
- Money market accounts
- Certificates of deposit (CDs)
As a result, deposit rates will likely drift lower in the weeks ahead.
The Fed’s New Forecast
Alongside the cut, the Fed released its quarterly “dot plot” of projections:
- Median forecast: Another half-point in cuts by year-end, likely one quarter-point cut at each remaining meeting.
- Disagreement remains: Six Fed officials projected no further cuts in 2025.
- 2026–27 outlook: Projections suggest only small additional reductions—just 0.25% each year.
Chair Jerome Powell cautioned that these forecasts aren’t guarantees, but probabilities that depend on future data.
Why Savers Still Have Opportunities
Even as yields drift lower, they remain historically strong compared to much of the past decade:
- Top high-yield savings accounts: 4.31%–5.00% APY
- Best 3–12 month CDs: 4.40%–4.60% APY
- Longer-term CDs: low-4% range
While these figures are a step down from 2023’s highs, they’re far above the sub-1% yields many endured for years.
What to Do Now
- Shop for the best rates: National averages are lower than the top rates available.
- Consider CDs: Lock in current yields before they drop further.
- Stay flexible: Savings accounts still provide attractive returns with full liquidity.
Bottom Line: The Fed’s September rate cut will gradually push savings and CD yields lower. But for now, deposit rates remain a rare bright spot—meaning savers still have time to earn meaningful returns on cash with little risk.
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