The Fed only went ‘big’ on its rate hike.  Here’s who will get a financial boost from that — and ‘at levels last seen in 2009’

The Fed only went ‘big’ on its rate hike. Here’s who will get a financial boost from that — and ‘at levels last seen in 2009’

With rates on CDs now well above 0.60%, experts agree that sticking to a longer-term plan is the best way to get the most bang for your buck.

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In its efforts to control record high inflation, the Federal Reserve went “big” on its rate hike, announcing this evening that it would once again raise the target federal funds rate by another 0.75 percentage points. This followed similar increases in June and July. While these rate hikes aren’t good enough for those with credit card debt or those trying to get a loan, one large group has already seen – and will continue to see – the benefit of rising interest rates. : savers. “High-yield savings accounts and certificates of deposit (CDs) are at levels last seen in 2009,” says Greg McBride, chief financial analyst at Bankrate. (See the best savings account rates you could find here.)

During 2022, interest rates on savings accounts have risen along with rate hikes from the Fed, the pros say. At the beginning of the year, high-yield accounts had a higher annual percentage return (APY) of about 0.50%, but now they’ve settled in the 1% to 3% APY range, according to recent Nerdwallet data.

Of course, in the context of nearly 40 years of inflation, those rates don’t look so good, but they are a big boost from years past. And the pros say most people still need 3-12 months of essential expenses in emergency savings.

So what happens now that the Fed has raised rates again? NerdWallet banking specialist Chanelle Bessette says banks will likely respond “by raising interest rates on savings accounts over the next month or so.”

How you can take advantage of rising interest rates

Given the current rate environment and a generally slowing economy, McBride says the best way for families to take advantage is to “boost emergency savings, pay off high-cost debt, and keep contributions into retirement accounts and a long-term view of them. .”

See the best savings account rates you could find here.

Bessette advises consumers to “shop around for a new bank account to make sure they get the highest return on their savings,” adding that “banks are also offering high interest rates on certificates of deposit, so It’s a good idea to look in. get one if you have longer-term savings goals.”

And MaxMyInterest CEO Gary Zimmerman says it’s critical to do your homework on savings accounts with the best APY. “For years, interest rates have been so low that many people have forgotten what it feels like to earn interest,” he says. “Keep an eye out for the best rates so you can keep your funds at whichever bank, or banks, can pay you the highest return each month.”

The advice, recommendations or ratings expressed in this article are the advice of MarketWatch Picks, and have not been reviewed or endorsed by our commercial partners.

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