Best Savings Rates at 1.30 Percent as Fed Meets Again in June
The best savings account rates available in the rate database moved higher again this week and are now at 1.30 percent. There are two banks offering savings rates at this level - UFB Direct and BankPurely. A yield of 1.30 percent is much higher than the current national average savings rate of 0.58 percent.
Savings rates and other deposit rates have been slowly inching higher for about 18 months now. Rates started moving up just before the Fed increased the fed funds rate in December 2015. Before the rate increases, the highest savings rates in the database were around 0.90 percent, 40 basis points less than now.
Since December 2015, the Fed has increased the rate two more times and is anticipated to increase the rate two more times this year. Two more rate increases would put the top end of the federal funds rate at 1.50 percent. If those hikes do take place in 2017, the top savings rates will be around 2.00 percent.
2.00 percent rates are nothing to write home about but are better than the current rate and more than double the 0.90 percent rate we saw in 2015. At least interest rates are headed higher.
The Fed met last week and didn't increase interest rates. Standing pat on interest rates was expected for the May meeting. The Fed meets again next month and is expected to increase the fed funds rate by 25 basis points. An increase of 0.25 percent would put the fed funds rate in a range of 1.00 percent to 1.25 percent. The last time the rate was at 1.00 percent was in December 2008.
If we do see a rate hike next month, banks and credit unions will likely increase their rates. We could see the top savings rates and money market rates head towards 1.50 percent or above. The top CD rates are already at 1.50 percent and would likely be increased to 1.75 percent.
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