If you've taken out a loan or federal funds target rate range from near-zero to more than 5%.in the past year, you're probably aware of how much interest rates have gone up. Since starting rate hikes in early 2022 to combat high inflation, the Federal Reserve has raised its
For savers, that has resulted in months of steady increases on savings account APYs — and the potential to grow their balances by hundreds of dollars in interest over time.
But after 10 consecutive rate hikes, Fed Chairman Jerome Powell last week said there would be "careful assessments" about future rate hikes based on incoming data and the economic outlook.and the Fed has begun signaling it may be ready to pause rates soon. Echoing remarks after the Fed meeting in early May,
"The risks of doing too much versus doing too little are becoming more balanced," Powell said, signaling that a pause could be in order. Now, the FedWatch Tool from CME Group predicts more than a 70% probability that interest rates remain the same after next month's meeting.
If you're relying on high-yield savings to, or considering opening a new account to take advantage, you should know how a rate pause may affect you.
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What could a rate pause mean for your savings?
Here are some ways a pause in rate hikes from the Federal Reserve could impact savers:
Rates will remain high
Even if there are no more rate hikes in the near future, that doesn't mean rates will go back down to where they were more than a year ago.
After the latest Fed rate hike, Chairman Powell reiterated that the effects of the Fed's actions do lag — part of the reason why inflation is only now beginning to come down. So it's not likely that there will be a decrease in interest rates any time soon, as the outcome of rate hikes is still playing out.
That means that you'll still earnon your savings if there is a rate pause. Even accounts with variable interest rates, like high-yield savings, will maintain incentives to keep rates high for customers. So you can still benefit from high interest rates for the foreseeable future — which today offer around .
It could be a good time for CDs
If rate hikes start to taper off, one option for savers to maximize still-high interest rates is to.
Because CDs carry fixed interest rates that you must lock in for the entire CD term, theis when rates are at their peak. Though a rate pause doesn't mean that rates will go down in the near future, there is a chance that rates will start to decline at some point. As a result, locking in a CD today could be a smart move.
If you want to maximize your interest earning, you might consider locking in a, since six-month to one-year CDs tend to carry the highest rates today. However, you could also open a longer-term CD (such as one with a three- to five-year term) to ensure you're benefiting from high rates as long as possible.
Keep saving money
Regardless of what changes happen with interest rates, it's always a good idea to contribute to your savings.
In general, you should have (or be working toward) at leastin an easily accessible account, like a high-yield savings account. This can help you cover unexpected expenses or weather financial difficulties.
Experts also believe there is a strong chance that the U.S.this year. If you're concerned about economic uncertainty or your work is relatively unstable, you may even want to consider adding more savings to your .
If you're already saving money toward your emergency fund or another goal, it's still a great time to keep contributing any extra funds you can. And if you haven't yet opened a high-yield savings account, you can increase your balance and help your future finances by starting to save today.
The bottom line
It's impossible to predict with absolute certainty what the Fed may do at its next meeting in June, but officials are beginning to signal that a rate pause could come sooner rather than later. Despite rates no longer rising at the speed they have been, it's still smart to save money. And while rates may not go up more, they'll still remain high — so you can keep benefiting from theon your balances.
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