Where Are Savings and CD Rates Headed? What Today's Fed Forecast Tells Us (2024)

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What the Fed Said Today

In what was an all but certain move, the Federal Reserve's rate-setting committee announced this afternoon that it is maintaining the federal funds rate at its current level of 5.25% to 5.50%. It's the seventh consecutive meeting in which the central bank has held its benchmark rate steady, after last raising it in July 2023.

To fight inflation that had reached a 40-year high, the Federal Reserve implemented 11 rate increases—some of them massive—across 12 meetings between spring 2022 and summer 2023. Its rate-hike campaign raised the federal funds rate a cumulative 5.25 percentage points, taking it to its highest level since 2001.

In its official statement today, the Fed indicated it would continue watching and waiting for more data before entertaining any rate-cut decisions.

“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," the FOMC said in its statement.

What the Fed Forecasts for 2024 and Beyond

Every three months, the Fed's rate announcement includes a "Summary of Economic Projections." The latest installment was released today, and all eyes are on the "dot plot" forecast it contains. The chart is so-named because it represents each Fed committee member as a nameless dot and lays out on a graph where each predicts the federal funds rate will be at the end of this year, in the coming two years, and beyond.

Today's dot plot shows that across the 19 Fed committee members, the median projection is one quarter-point (0.25%) rate cut by the end of 2024. However, a sizable contingent predicts two rate decreases of 0.25% each for a total of 0.50% this year. A minority group (about 20% of members) is meanwhile betting the other way, forecasting the fed funds rate will remain where it is through the end of the year.

How the Fed's Decision Impacts Savings and CDs

The federal funds rate has a direct impact on the interest that banks and credit unions are willing to pay for savings, money market, and certificate of deposit (CD) accounts. When the Fed's benchmark rate is high, interest rates for bank customers are elevated as well. The reverse is true when the federal funds rate is low.

In a rate-hold situation like we have now—and where the next development is expected to be a rate cut—some banks and credit unions have been lowering CD rates slightly. That's because CDs offer you not just a rate today, but a future-rate guarantee: For however long your CD term lasts, the CD's rate will be locked.

You can see that difference between savings account and CD rates right now. CD rates hit peaks last fall, and have since drifted downward. But the leading savings account rate climbed to a new high in April—and still remains there. You can now earn as much as 5.55% annual percentage yield (APY) with the top-paying account, and it's possible that savings account rates will stay high for the duration of the Fed's rate hold.

Get a High Savings or CD Rate While You Can

As we've said, savings and CD accounts offer exceptionally high rates right now, and those rates should continue until it looks like the fed funds rate is about to drop. Traders of fed funds futures predict the Fed will hold rates steady another time, at its July 31 meeting. But by the Sept. 18 meeting, a strong majority of traders expect the Fed will have made a first cut.

But the future of Fed rate moves is always uncertain, and new inflation data released later this month and in July could certainly alter the Fed's path. It's possible the central bankers will decide they are ready for a rate decrease by the time the July 31 meeting approaches.

So what to do with your savings now? If you want to make sure you can get at your cash easily, putting it in one of the best high-yield savings accounts is a smart move. The sooner you get it into a top-paying account, the sooner (and longer) you'll be able to start raking in big interest payments.

But if you can commit to not touching some of your money for months or even years, consider a CD. While savings account rates will fall with the fed funds rate, a CD you open now will have a guaranteed rate that can't be changed. By shopping our daily ranking of the best CD rates, you can lock in a rate of up to 6.00% for short- and mid-term CDs (3 months to 2 years), or something in the mid-4.00% range to 5.00% on longer terms.

Since CD rates are fixed, today's CD returns are expected to significantly out-pay the rates you'll be able to earn on savings accounts and new CDs once the Fed begins lowering the fed funds rate. So it's a good time to lock in one of today's great rates while you can.

How We Find the Best Savings and CD Rates

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account's minimum initial deposit must not exceed $25,000.

Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.