Key Takeaways
- The Fed announced another rate pause today, an all-but-certain move that kept the federal funds rate at its current level: 4.25% to 4.50%.
- This benchmark rate is important to savers, as it directly impacts the rates that banks and credit unions are willing to pay on savings accounts and CDs.
- The Fed also released its quarterly “dot plot” forecast today, which estimates a 0.50-point reduction by the end of 2025, and a further half-point drop in 2026.
- While rates are still high, earn a good return on your cash with one of the best high-yield savings accounts, or lock in a high rate for months or years with one of today’s best CDs.
The full article continues below these offers from our partners.
What the Fed Announced for Rates Today
As was overwhelmingly expected, the Federal Reserve’s rate-setting committee announced today that it is maintaining the federal funds rate at its current level of 4.25% to 4.50%. This matters to savers because changes to the federal funds rate trigger banks and credit unions to follow suit. They change their rates on deposit accounts, such as savings and certificates of deposit (CDs).
In its official statement today, the Fed noted that its goals are “to achieve maximum employment and inflation at the rate of 2 percent over the longer run.” It plans to “monitor the implications of incoming information for the economic outlook” and noted that it “would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.”
The federal funds rate sat at a 23-year high from July 2023 until September 2024, raised to that level by the central bank to combat decades-high inflation. By the fall of 2024, with inflation significantly cooled, the Fed moved to a rate-cutting phase, with rate reductions in September, November, and December. The three cuts lowered the Fed’s benchmark rate by a full percentage point.
But inflation is still proving stubborn, hovering below 3% but not yet down to the Fed’s desired 2% target. That led the central bank to hold rates steady at its January meeting, and once again today. But as we discuss below, we did get some additional insights from the Fed at this meeting.
What the Fed Predicts for the Rest of 2025
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 upcoming years.
Today’s dot plot shows that across the 19 Fed committee members, the median projection is for an additional 0.50-point rate cut across the remaining six meetings of 2025. Fed committee members also predict a further 0.50-point reduction in 2026. If that comes to fruition, it would result in a federal funds range of 3.25%–3.50% vs. the 4.25%–4.50% target maintained today.
When asked at the Fed’s post-announcement press conference about the timing of future rate cuts and the possibility of pivoting back toward rate cuts in May, Federal Reserve Chair Jerome Powell indicated a measured approach. “I think we are not going to be in any hurry to move,” he said. “As I mentioned, I think we are well-positioned to wait for further clarity and not in any hurry.”
Tip
As for when the Fed’s predicted rate reductions will arrive, markets are betting we’ll be waiting a few months before the first cut of 2025. According to the CME Group’s FedWatch Tool at the time of this writing, most traders are pricing in another rate hold at the Fed’s May meeting. The June meeting is the first time we see majority odds for a rate cut.
With Rates Still Attractive, High-Yield Savings Accounts and Top-Paying CDs Are Smart Right Now
Thanks to the Fed pushing interest rates up dramatically in 2022–2023, savings accounts and certificates of deposit have been paying handsomely. Though rates on the best high-yield accounts and CDs drifted down throughout 2024, you can still earn a historically high return in the mid- to upper-4% range. One promotional CD is even paying 5.00% APY with an 18-month rate lock.
That could change at any time, since the Fed’s course is never assured. And right now, an extra layer of uncertainty exists due to economic policies coming out of the Trump administration. “Uncertainty around the economic outlook has increased,” the Fed’s rate-setting committee said in a statement today. The Fed’s outlook is now more pessimistic than it was in December, indicating a growing risk of “stagflation,” a mixture of inflation, high unemployment, and slow economic growth.
The general expectation is that interest rates will dip lower in 2025 and perhaps also in 2026. You can still capitalize on great rates with the best high-yield savings accounts while they’re available. And if you can stash some cash for later, locking in one of today’s best CD rates is also a smart move because it guarantees a high rate for months or years into the future.
Daily Rankings of the Best CDs and Savings Accounts
Important
Note that the “top rates” quoted here are the highest nationally available rates Investopedia has identified in its daily rate research on hundreds of banks and credit unions. This is much different than the national average, which includes all banks offering a CD with that term, including many large banks that pay a pittance in interest. Thus, the national averages are always quite low, while the top rates you can unearth by shopping around are often 5, 10, or even 15 times higher.
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. It also cannot specify a maximum deposit amount that’s below $5,000.
Banks must be available in at least 40 states to qualify as nationally available. 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.