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Savings yields are now quite high. Can they ascend further?
Savings accounts with high returns now provide the greatest yields in more than 15 years at rates exceeding 5%. However, if the Fed's economic forecasts are to be believed, they may not have crested yet.
Savings rates soared in 2022 and this year as a result of the Federal Reserve raising rates ten times in a row. Additionally, even though the Fed kept interest rates unchanged at its most recent meeting, it seems that it will do so one or two more times this year, providing savers optimism for even higher returns later in the year.
Rates on the best savings accounts are at all-time highs.
The federal funds rate, which the Federal Reserve sets at its eight policy meetings a year, has a significant impact on the interest rates for high-yield savings accounts. The Federal Reserve started an aggressive rate-hike campaign in 2022 as inflation soared in an effort to increase borrowing costs and reduce consumer spending. Inflation hit a 40-year high in June of last year, but a series of rate increases—seven in 2017 and three so far in 2018—that raised the federal funds rate from zero in March 2022 to five and a half percent today have been accompanied by a slowing of inflation.
Banks and credit unions often pay higher interest rates on the money they keep when the federal funds rate increases. Therefore, it is not unexpected that rates on high-yield savings accounts have skyrocketed during the last 15 months.
The highest interest rate for a national savings account in the first two months of 2022 was just 0.70% APY. The highest rate in our daily list of the top savings account rates as of this month is 5.17%, provided by CFG Bank. Seven other banks provide savings accounts with interest rates of at least 5.00%.
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