CDs vs. high-yield savings accounts: What to consider if the Fed cuts rates

With the economy improving and inflation down quite a bit since its peak a few years ago, some experts think that the Federal Reserve could cut interest rates later on this year. Should that happen, rates on high-yield savings accounts and certificates of deposit (CDs) are likely to fall, too. Opinions on rate cuts in 2024 are mixed, however, as the inflation rate has ticked back up over the last couple of months.

Still, if rate cuts do occur, they could have a big impact on these types of deposit accounts. Right now, the average regular savings account offers just 0.46%, but it’s easy to find high-yield savings accounts offering rates that are 10 to 12 times higher than the rates offered on regular savings accounts. And, depending on the CD term, rates on CD accounts can be even higher than what’s being offered on high-yield savings accounts. So a rate cut in the future could mean earning less on these types of accounts.

But how far will these rates fall if the Fed makes that move? And will both types of accounts be affected similarly?


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