Best Online Savings Rates Poised to Move Higher
online savings rates are around 2.25 percent but we could see the top rates move towards 2.50 percent by early October. We expect savings rates to move higher because the Federal Reserve is predicted to increase the fed funds rate.
The Fed meets on September 25th and 26th and is widely expected to increase their key benchmark interest rate, the fed funds rate, by 25 basis points to a range of 2.00 to 2.25 percent. This will be the third increase in 2018 and the seventh increase during this tightening cycle.
We might also see one more increase of 25 basis points in December, which would send savings rates even higher into the 2.75 percent range. Higher savings rates are good news for depositors who have suffered through low rates for about a decade.
Best Online Savings Rates in 2019
Looking ahead to 2019, rates will move even higher if economic growth remains strong. The Fed's own projection materials, released in June, forecast a fed funds rate of around 3.25 percent. A fed funds rate of 3.25 percent would send the best online savings rates towards 3.50 percent.
We haven't seen savings rates as high as 3.50 percent since the financial crisis, nearly a decade ago.
Of course, all of these interest rate forecasts can change in either direction, especially for longer term forecasts. Stronger growth will lead to even higher rates. If inflation is higher than the Fed's target range of 2.00 percent, rate increases could accelerate. The inflation rate accelerating is a real possibility because of the tariffs on trade between the U.S. and China.
The biggest risk to interest rates moving lower from current levels is slower economic growth or worsening a recession.
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