When the Federal Reserve hikes or cuts the federal funds rate, interest rates on many types of financial products tend to increase or decrease accordingly. This includes savings accounts, where a higher federal funds rate often means consumers can expect to earn a higher annual percentage yield (APY) on their savings. But, the Fed does not directly set savings account rates. Read on and we’ll explain how what the Fed does can impact your bank accounts.

Are high-yield savings rates expected to change?

The interest rates offered on high-yield savings accounts—or any savings account—can change at any time, as these rates are at the discretion of the financial institutions. Still, as of this writing, it’s possible to find HYSAs offering APYs up to 5%. If the Fed makes further cuts to the federal funds rate later this year, it’s possible savings account rates will also see a decline.

Learn more: What APY means and how it works. 

Consumers looking for a guaranteed rate of return that won’t be impacted by Fed decisions may wish to open CD accounts sooner rather than later. More on that later in the article.

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Varo Bank	SoFi® Checking and Savings (Member FDIC)	Axos Bank
APY	APY	APY
5%	Up to 3.80%1	4.86%
Minimum Balance Required to Earn APY	Minimum Balance Required to Earn APY	Minimum Balance Required to Earn APY
$0	$5,0002	$1,500
Minimum Opening Deposit	Minimum Opening Deposit	Minimum Opening Deposit
$1	$0	$1
View offer at MoneyLion	View offer at SoFi	View offer at Axos Bank

What is the federal funds rate?

As explained by the Fed itself, the federal funds rate is what banks charge each other when they need to borrow money overnight. Right now, the target range for the federal funds rate is 4.25%-4.50%. The Federal Open Market Committee (FOMC) holds eight meetings per year and has the authority to raise, lower, or hold steady on the federal funds rate at these meetings. At the most recent FOMC meeting in March, the Fed opted to keep the federal funds rate unchanged.

Dropping the federal funds rate is one of the Fed’s tools to stimulate the economy when there’s fear of a recession. For example, the Fed cut this rate to effectively zero during the coronavirus pandemic. In contrast, hiking the rate is one of the Fed’s tools for combating inflation.

Post-pandemic, the central bank hiked the federal funds rate 11 times in 2022 and 2023, then paused and held steady for more than a year before finally making three rate cuts in the last quarter of 2024.

How Fed rate cuts and hikes can impact your savings rate

Even though the Federal Reserve does not set APYs on savings accounts, it’s true that banks and credit unions may increase or decrease the rates they offer when the Fed adjusts the federal funds rate. For that reason, a higher federal funds rate may benefit your savings account, and conversely, a lower federal funds rate is likely better for those who need to borrow money through products such as mortgages.

Below, you can see how the Fed rate cuts in 2024 led many institutions to lower their rates on savings accounts. These levels are likely to stay fairly steady until we see further interest rate changes, but there are no guarantees on how long the rates will last. Savings account rates can change any time, at the discretion of the bank.

View this interactive chart on Fortune.com

How to maximize the interest you earn on your savings

The average savings account yields 0.41%, according to the FDIC— and that’s down from 0.46% last summer. That’s a pretty terrible return, but it’s important to understand the average is weighed down by the majority of accounts that offer little to no return on your deposits. 

You can get a much better rate by shopping around for a high-yield savings account. In general, you’ll often be able to find higher interest rates for online-only savings accounts as opposed to savings accounts at institutions with brick-and-mortar branches.

What about CDs and other bank accounts?

The federal funds rate can have an indirect effect on your certificates of deposit (CDs) and other types of financial accounts in much the same way it can impact your savings. Here’s what you need to know.

Certificates of deposit

This type of deposit account is probably where we’ve seen the most impact so far. Top rates on certificates of deposit dropped from nearly 6% in the summer of 2024, to below 5% in January 2025. Those rates will likely continue to come down if the Fed makes further cuts.

The best thing about a CD, though, is that you’re locked into that interest rate for the full length of the term. That means if you get a 4.50% CD now that lasts two years, you’re guaranteed that rate of return for the whole two years regardless of what happens to the fed funds rate in the meantime.

View this interactive chart on Fortune.com

Money market accounts

These types of deposit accounts function similarly to checking accounts, with much higher yields but lower rates than HYSAs. They’re good for stashing large amounts of cash you don’t use often but would want to be able to access quickly in case of emergency. Much like savings accounts, you’ll almost certainly see an impact on these rates that correlates with shifts in the market.

Checking accounts

Reality check: Considering how low most rates are, any interest you might earn on a checking account is icing on the cake and not the sole focus. Fed policy changes have a negligible impact on checking accounts but considering how low the APYs are already, it’s not a significant concern.

The takeaway

The Federal Reserve doesn’t directly set the interest rate you earn on your savings account or other bank accounts, but the central bank’s actions can still influence your APY. That’s because rates on financial products often rise and fall in tandem with the Fed hiking or cutting its benchmark federal funds rate. In short, the Fed cutting rates can mean a lower yield for your savings. 

Stashing your money in CDs can be a smart way to get ahead of expected Fed rate cuts, as once you open a CD, you’re guaranteed a set interest rate for the life of the account. Just know your money isn’t very liquid when saved this way, as you’re required to leave CD funds untouched for an agreed-upon period of time—often ranging from three months to five years. 

Purchasing government bonds is another alternative to keeping your money in a savings account. Sean Snaith, director of the University of Central Florida’s Institute for Economic Forecasting, notes that consumers may appreciate bonds for the stability they provide.

“In terms of safety and security, U.S. Treasury bills and bonds are going to offer you safety, and you don’t have to worry about defaulting,” Snaith says. “But make sure to shop around at different financial institutions, banks, or credit unions for your best options.”

1

SoFi members who enroll in SoFi Plus with Direct Deposit or by paying the SoFi Plus Subscription Fee every 30 days or with $5,000 or more in Qualifying Deposits during the 30-Day Evaluation Period can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. Members without either SoFi Plus or Qualifying Deposits, during the 30-Day Evaluation Period will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Only SoFi Plus members are eligible for other SoFi Plus benefits. Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet. See the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

2

New and existing Checking and Savings members who have not previously enrolled in Direct Deposit with SoFi are eligible to earn a cash bonus of either $50 (with at least $1,000 total Direct Deposits received during the Direct Deposit Bonus Period) OR $300 (with at least $5,000 total Direct Deposits received during the Direct Deposit Bonus Period). Cash bonus will be based on the total amount of Direct Deposit. Direct Deposit Promotion begins on 12/7/2023 and will be available through 1/31/26. See full bonus and annual percentage yield (APY) terms at sofi.com/banking#1.

This story was originally featured on Fortune.com

WASHINGTON (AP) — The Trump administration has suspended approximately $175 million in federal funding for the University of Pennsylvania over the participation of a transgender athlete in its swimming program, the White House said Wednesday.

The Ivy League school has been facing an Education Department investigation focusing on in its swimming program. That inquiry was announced last month immediately after President Donald Trump signed an executive order intended to ban transgender athletes from competing in girls and women’s sports.

But the federal money was suspended in a separate review of discretionary federal money going to universities, the White House said. The money that was paused came from the Defense Department and the Department of Health and Human Services.

A Penn spokesperson said the school had not received any notification or details of the action.

“It is important to note, however, that Penn has always followed NCAA and Ivy League policies regarding student participation on athletic teams,” spokesperson Ron Ozio said. “We have been in the past, and remain today, in full compliance with the regulations that apply to not only Penn, but all of our NCAA and Ivy League peer institutions.”

The investigation opened by the Education Department’s Office for Civil Rights at Penn focuses on Lia Thomas, who swam on the school’s women’s team and was the first openly transgender athlete to win a Division I title in 2022.

The agency also opened reviews of San Jose State University volleyball and the Massachusetts Interscholastic Athletic Association.

This story was originally featured on Fortune.com

• The Fed left interest rates unchanged at its Wednesday policy meeting. As expected, the Fed reiterated it was in no rush to change monetary policy, instead preferring to wait to determine how fiscal policy would affect the economy. Since President Donald Trump took office two months ago, properly forecasting the U.S. economy has become more difficult given recent trade policies. 

The Federal Reserve left interest rates unchanged for the second time this year. 

After Wednesday’s meeting, the interest rates remain between 4.25% and 4.5%. Investors and economists had largely anticipated the Fed would hold off on any changes to monetary policy. 

However, the Fed acknowledged a cloudy economic picture up ahead, which had spread anxiety throughout the market. Stocks plummeted earlier this month and executives on earnings call regularly cited murky outlooks and declining consumer confidence as possible headwinds.

“Uncertainty around the economic outlook has increased,” the Federal Open Markets Committee said in a statement after the decision was announced. “The Committee is attentive to the risks to both sides of its dual mandate,” of stable prices and a maximum employment.

The Fed plans to wait before making any further moves because the economy was on solid footing at the moment, and because it was unsure what effect fiscal and trade policies would have on its future. Essentially, the economy’s current strength is buying the Fed time as it tries to decide the proper course of action based on the impact the Trump administration’s policies could have on the economy. 

During his first two months back in office, President Donald Trump has already started to make good on his campaign pledges to institute widespread tariffs on the U.S.’s trading partners. Many of Trump’s early tariff policies risk upending global trade, though, by cutting off the free market’s flow of goods from one country to the other. The unprecedented nature of some of these proposals markets has thrust considerable uncertainty into economic outlooks, including at the Fed. Further fueling the uncertainty is that Trump has gone back and forth on his policies. Twice already he has implemented and reversed a series of tariffs against Mexico and Canada. 

All that has made it difficult for investors to assess where the economy is headed. Ahead of the meeting, investors worried that even the Federal Reserve would have doubts about its own economic forecasts. 

“The Fed may issue signals of no-confidence,” Macquarie rates strategist Thierry Wizman wrote in an analyst note ahead of the meeting. 

Commentary accompanying Wednesday’s interest-rate decision did not necessarily assuage those concerns, as the Fed didn’t offer forecasts about the economy.

The U.S. economy remains relatively sound at the moment. The unemployment rate in February was 4.1%, 10 basis points higher than in January. Inflation, too, remains stable at 2.8%, but still above the Fed’s 2% target. These factors give the Fed enough room to maneuver as it waits to see what happens next. 

“The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid,” the FOMC said in its statement. “Inflation remains somewhat elevated.”

There have been some early signals the U.S. economy could be bending. In February, the U.S. economy added 150,000 jobs, which, while hardly the mass layoffs that precede a recession, was less than the 170,000 jobs economists expected. There was also an uptick in layoffs that could presage a deeper slackening of the labor market. At the same time, over the last year the last mile of inflation has proven stubborn. That problem could only worsen in the coming months as the Trump administration’s hardline tariff and immigration policies are widely expected to be inflationary. But again, investors are grappling with the fact they have little understanding of how these policies will impact the economy, or if they’ll even go into effect at all. 

“This uncertainty and negativity would normally give the Fed enough fuel to cut interest rates,” Eric Diton, president and managing director of investment firm The Wealth Alliance, told Fortune ahead of the Fed’s meeting. “But, as noted above, there is too much uncertainty at this time for the Fed to act.

That unusual and precarious nature of that economic backdrop was not lost on the FOMC, which continued to reiterate the Fed would act in whatever way was necessary moving forward. 

“The Committee 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 statement read.

This story was originally featured on Fortune.com