In June 2017, the Federal Reserve raised its benchmark interest rate by a quarter-point to a target range between 1 percent and 1.25 percent. The move comes as the labor market has continued to strengthen and economic activity has risen moderately so far this year, according to a Federal Reserve press release. “Job gains have moderated but have been solid, on average, since the beginning of the year, and the unemployment rate has declined,” according to the Fed release.
This is the third time in six months that the Fed has raised its benchmark interest rate, which is the interest rate banks earn when they deposit money at the Federal Reserve (the central bank for the U.S.).
For banks, the Federal Reserve rate hike means higher interest rates on their money. But what are the implications for regular savers, and when will savings account interest rates rise?
If you have a savings account, or are considering opening one, here are three key takeaways on savings interest rates:
1. Savings may be passed on to you
As banks can earn higher interest rates on their money, over time, these interest rates may be passed on to savers in the form of higher savings account interest rates. After all, banks are competing with each other for their customers’ savings. Eager to know when savings account interest rates will rise? This process can take place slowly, so savers may not notice higher amounts in their savings accounts immediately.
2. You can shop for the best savings account rates
With the Federal Reserve increasing interest rates and banks slowly passing higher savings interest rates on to consumers, it is well worth the time to shop around for the best rates on savings accounts. This is especially true as many large banks are still offering little to no interest on savings accounts. In fact, the difference between earning 0.95% Annual Percentage Yield (APY) and 0.01% APY is not just the order of the numbers, it is 95x more interest earned in your savings account. This higher savings account interest rate could impact your ability to grow your savings to reach your financial goals.
3. Your dollars can go further
With a relatively healthy economy and interest rates climbing in the U.S., the dollar’s value has risen. This means that when traveling, your dollar may go further in many countries around the world when compared to last year. Now is a good time to start saving for an international vacation to take advantage of the strong currency and any growth in your savings interest rate.
When will savings account interest rates rise?
While the Federal Reserve interest rate increase may mean a little more in your savings account (thanks to a higher savings account interest rate), practicing good money habits consistently will help you the most. Build an emergency fund, keep your spending within your means, save regularly and remember your financial goals to stay motivated.
Discover Bank, Member FDIC