When will savings account interest rates go up?

The Federal Reserve (often referred to as “the Fed”) is, among other things, responsible for supporting a strong, stable economy in the United States. 

Inflation is one phenomenon that can throw a wrench in economic growth. When inflation starts to get out of hand, the Fed may decide to raise its benchmark interest rate—commonly known as the federal funds rate, which is the interest rate banks charge each other to lend funds overnight. 

The Fed raised rates several times to tamp down the inflation that defined 2022 and 2023. While inflation can make it hard to save, these interest rate hikes aren’t necessarily a bad thing for savings accounts as they can also encourage banks to increase their rates. But with all the recent talk about inflation, the Fed, and interest rates, you may be wondering: Are savings interest rates likely to rise? And if so, when will savings interest rates go up?

If you have a savings account, or are considering opening one, consider these takeaways on savings interest rates:

Higher interest rates can encourage saving

If you’re wondering “are savings interest rates likely to rise?” the answer is it depends. In 2022 and 2023, the Fed interest rate hikes made it more expensive to borrow money. When you make a deposit into a savings account at a bank, that bank is essentially borrowing money from you, which means your savings interest rates are likely to go up, too. 

That means you can earn a little more for every dollar in your savings account. 

Eager to know when will savings interest rates go up after seeing headlines announcing a Federal Reserve rate hike? If banks do decide to raise savings interest rates, it may not happen right away, so the impact to your finances will not be immediate. 

You can typically log into your savings account to confirm the interest rate you are earning, often expressed as the Annual Percentage Yield (APY), or you can check on your bank’s website.

Find the best savings account interest rate

If the Federal Reserve increases interest rates and banks pass higher savings interest rates on to consumers, it is well worth the time to shop around for the best rates. 

If you’re considering opening a savings account online, keep a close eye on the APY to see which bank could give you the most savings account interest earnings. (The higher the APY, the more money you will be able to put toward your financial goals.) Unlike a savings account interest rate, the APY considers how often the interest compounds. Your savings interest rates could compound daily, monthly, quarterly, or annually.

When comparing savings accounts, don’t forget to consider other features, including minimum balance requirements, fees, and access to customer service.

When will savings account interest rates rise after a Fed rate hike?

To sum it up: Are savings interest rates likely to rise? Yes, an increase is likely if the Federal Reserve raises its rates. And when will savings interest rates go up? After a Fed interest rate hike, a bump in the savings interest rates could be next. That may mean a little more in your savings account thanks to higher savings interest rates, but by practicing smart money habits, you have the opportunity to do more to improve your finances. Building an emergency fund, setting and sticking to a budget, saving money regularly, and remembering your financial goals will help you to stay motivated.

Do you have some big financial goals? Try creating a vision board to keep them top of mind and within your reach.  

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