In its efforts to reign in record-high inflation, the Federal Reserve “went big” on its rate hike, announcing this afternoon that it would again raise the target federal funds rate by another 0.75 percentage points. This followed similar hikes in both June and July. While these rate increases don’t bode well for those with credit card debt or those looking to get a loan, one big group has already seen — and will continue to see — the benefit of rising interest rates: savers. “High-yield savings accounts and certificates of deposit (CDs) are at levels last seen in 2009,” says Greg McBride, chief financial analyst at Bankrate. (See the best savings account rates you may get here.)
Throughout 2022, interest rates on savings accounts have risen along with rate hikes from the Fed, pros say. At the start of the year, high-yield accounts generally topped out at around 0.50% annual percentage yield (APY), however now they’ve settled in the range of 1% to 3% APY, according to recent Nerdwallet data.
Of course, in the context of inflation at a near 40-year high, those rates don’t look quite as good, but they’re still a big boost from years past. And pros say that most people still need between 3-12 months of essential expenses in emergency savings.
So what happens now that the Fed has raised rates again? NerdWallet banking specialist Chanelle Bessette says banks are most likely to “respond by raising interest rates on savings accounts over the next month or so.”
How you can benefit from rising interest rates
Given the current rate environment along with a generally slowing economy, McBride says the best way for households to benefit is by “boosting emergency savings, paying down high-cost debt, and maintaining contributions into, and a long-term perspective on, retirement accounts.”
See the best savings account rates you may get here.
Bessette suggests consumers “shop around for a new bank account to make sure they receive the highest return on their savings,” adding that “banks are also offering high-interest rates on certificates of deposit, so it would be a good idea to look into getting one if you have longer-term savings goals.”
And MaxMyInterest CEO Gary Zimmerman says doing your homework on savings accounts with the best APY is critical. “For many years, interest rates have been so low that many people forgot what it feels like to earn interest,” he says. “Keep an eye out for the best rates so you can keep your funds at whichever bank, or banks, can pay you the highest yield each month.”