The Fed Is Meeting on Interest Rates Next Week. Here’s How We Think Savings and CD Rates Will React.

The full article continues below these offers from our partners.

Knowns and Unknowns From the Fed Next Week

The Federal Reserve meets every six to eight weeks to decide whether to raise, lower, or maintain its federal funds rate. This benchmark interest rate is important to savers because it impacts what banks and credit unions are willing to pay consumers on savings, money market, and certificate of deposit (CD) accounts.

The Fed’s next rate announcement will be made next Wednesday afternoon. Based on the current economic data, financial markets are pricing in 97% odds that the Fed will hold the fed funds rate steady, having also done so at its last meeting. That’s the part we can feel pretty confident about: Virtually no one expects the Fed to raise or lower rates next week.

But another very useful piece of information will be released Wednesday: the Fed’s “dot plot” forecast for where it sees interest rates headed in the coming year. We only get this behind-the-curtain peek at central banker predictions once per quarter, with the last dot plot released in December 2024.

There is no way to know what the dot plot will show until it’s released. But we can see what interest rate traders currently predict. Below you can see that markets are pricing in a nearly 60% probability that, by the end of this year, the federal funds rate will be 0.75 percentage points lower than today. That would most likely take the form of three quarter-point rate drops spaced out over the six remaining Fed meetings from May to December.

How Savings Account and CD Rates Are Likely to React to the Fed

With no rate move expected from the Fed next week—or even perhaps at the following meeting in May—we don’t anticipate savings account rates to show much change in the immediate term. Since banks and credit unions can change their savings rate at the drop of a hat, they are often comfortable waiting to lower rates until an actual Fed move happens.

That said, there is no guarantee that the top savings account rate will remain available—any given offer can be adjusted at any time. But across our ranking of the best high-yield savings accounts, we don’t anticipate that next week’s likely Fed rate hold will trigger much meaningful change in the range of APYs you see there.

For CDs, on the other hand, banks and credit unions tend to behave a bit differently. That’s because CDs offer you not just a rate today but a future rate guarantee—and institutions don’t want to get locked into paying CD rates they’ll regret down the road. As a result, institutions often change their CD rates in advance of an upcoming Fed rate move, especially when confidence in the Fed decision is high.

So what does that means for the best CD rates next week? It will likely come down to the 2025 rate forecast released in the dot plot. If the central bankers reveal a confirmation of the market’s prediction that we’ll see three quarter-point rate cuts this year, that could move some banks and credit unions to begin gradually stepping off the gas on CD rates.

But if the Fed indicates they expect fewer 2025 rate cuts, that would be a signal that the current federal funds rate could hold steady for several more months, in turn making banks and credit unions less certain about reducing their CD rates until there is more clarity.

Smart Moves to Make With Your Savings Now

While savings and CD rates could hold steady for a bit in light of one or two more Fed rate holds, it’s also expected they will eventually start moving lower, given that at least some level of rate cuts are likely this year. But it’s also true that we don’t know what the Fed’s 2025 forecast will reveal or how quickly the best CD rates could react.

In any case, if you have cash savings in a bank account that pays little to nothing, moving it to a high-yield savings account will start delivering monthly interest payments that essentially amount to free money. And the sooner you can move to one of today’s best high-yield savings accounts—which currently pay up to 4.60%—the sooner you’ll put your savings to work. Even if rates fall, they’ll likely fall across the market, so it’s always smart to shop around to make sure your money is earning a competitive rate.

If you can also commit to not touching some of your savings for months or even years, one of today’s top-paying CDs is another smart move since a CD you open now will have a guaranteed rate that can’t be lowered. By shopping our daily ranking of the best nationwide CDs, you can choose from dozens of options paying between 4% and 5% on terms of 3 months to 5 years. For instance, the nation-leading offer pays 5.00% APY for 18 months, locking in your return until September of next year.

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.

Banks must be available in at least 40 states. 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.