Current Checking Account Rates (Week Of January 15th, 2024)
Last updated 04/08/2024 by
Benjamin Locke
Edited by
Andrew Latham
Summary:
As of January 15th, 2024, high-yield checking accounts continued to perform well, keeping their APY at 7.23%. This could be seen as a positive effect of the Federal Reserve’s economic policies.
As of the third week in January 2024, the banking industry, especially those offering high-yield checking accounts with a steady Annual Percentage Yield (APY) of 7.23%, demonstrated ongoing stability. This consistent performance in yields is a testament to the Federal Reserve’s adept handling of the financial sector, maintaining the attractiveness of these accounts. Observers remain attentive to the fluctuations in interest rates as the year progresses.
So what’s up with the Fed this week?
In 2023, the Federal Reserve Banks reported preliminary financial results showing a significant shift in their income and expenses compared to the previous year. The total expenses of the Reserve Banks exceeded their estimated earnings by $114.3 billion, a stark contrast to the net income of $58.8 billion in 2022. Interest income from securities acquired through open market operations amounted to $163.8 billion, a decrease from the $170.0 billion in 2022. The total interest expense saw a substantial increase to $281.1 billion, up by $178.7 billion from the previous year. This increase was primarily due to higher interest expenses on reserve balances held by depository institutions and on securities sold under repurchase agreements. The Reserve Banks also earned $10.4 billion in interest income from loans to depository institutions and other borrowers, including from the Bank Term Funding Program and Paycheck Protection Program Liquidity Facility. Operating expenses, after reimbursements, were $5.5 billion, and additional assessments included costs for currency production, Board expenditures, and funding the Consumer Financial Protection Bureau.
The Reserve Banks recorded a net income of $0.1 billion from emergency credit facilities established during the COVID-19 pandemic and earned $0.5 billion from payment and settlement services. Statutory dividends paid in 2023 totaled $1.5 billion. According to the Federal Reserve Act, the Reserve Banks are required to remit excess earnings to the U.S. Treasury after covering operating costs, dividend payments, and maintaining a surplus. In 2023, due to insufficient earnings to cover these costs, the Reserve Banks recorded a deferred asset increase of $116.4 billion, bringing the cumulative deferred asset to $133.0 billion at year-end. This deferred asset represents the net excess earnings needed before the Reserve Banks can resume remittances to the U.S. Treasury.
| Type of Account | Last Week’s Highest APY | This Week’s Highest APY | Change (Percentage Points) |
|---|---|---|---|
| High-yield checking | 7.23% | 7.23% | No Change |
Pro Tip
“Savings and checking accounts are used by individuals to deposit and store their money. Banks use these deposits to lend to others, which means they can offer lower interest rates as they do not bear the same level of risk. Additionally, savings and checking accounts are often seen as more stable and predictable, making them a safer investment for consumers.” said Philana Kwan, Growth Associate at Driva.
Fed’s activity in 2023
In 2023, the Federal Reserve took decisive action in response to the evolving economic landscape by adjusting its interest rates multiple times. These hikes were part of the Fed’s strategy to manage inflationary pressures and stabilize the economy. Starting in February, the central bank initiated a series of rate increases, signaling its intent to ensure sustainable economic growth. By July, the cumulative adjustments brought the rate range from 5.25% to 5.50%. These moves reflected the Federal Reserve’s commitment to maintaining monetary stability and its proactive approach to addressing economic challenges.
| Date | Rate Increase (basis points) | New Rate Range |
|---|---|---|
| February 1, 2023 | 25 | 4.50% – 4.75% |
| March 22, 2023 | 25 | 4.75% to 5.00% |
| May 3, 2023 | 25 | 5.00% to 5.25% |
| July 26, 2023 | 25 | 5.25% to 5.50% |
How does the Fed change affect the interest on checking accounts?
The Fed’s interest rate policy affects the rates on checking accounts, as delineated below:
| Aspect | Description |
|---|---|
| Direct Correlation | Checking account interest rates are generally correlated to the federal funds rate. This means that if the Federal Reserve increases its interest rate, the interest rates on checking accounts are likely to increase as well, and vice versa. |
| Lag in Response | While there’s a correlation between the Federal Reserve’s rate and checking account rates, the latter might not immediately adjust in response to changes made by the Federal Reserve. In other words, even if the Fed raises its rates, it might take some time before banks adjust the rates they offer on checking accounts. |
| Attracting Deposits | After the Federal Reserve raises its rate, financial institutions might adjust the interest they offer on interest-bearing checking accounts. This is done to stay competitive and attract deposits. Banks want to encourage people to use their checking services, and offering competitive rates can be an effective way to do so. |
| Overall Financial Ecosystem Impact | The Federal Reserve’s decision to raise or lower interest rates affects the entire financial ecosystem. This includes not just checking account rates but also APRs and APYs on various financial products. |
Key Takeaways
- During the week of January 15th, 2024, the stability in the financial sector was evident as high-yield checking accounts continued to offer a 7.23% APY, maintaining their consistent performance.
- The Federal Reserve’s recent meeting concluded with maintaining the current rate policy, reinforcing a period of financial stability and potentially impacting savings and checking account rates.
- The Federal Reserve’s rate adjustments throughout 2023, culminating in a rate range of 5.25% to 5.50% by July, demonstrate its proactive approach to managing inflationary pressures and stabilizing the economy.
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