Current Savings Account Rates July 2024
Last updated 08/21/2024 by
Benjamin Locke
Edited by
Andrew Latham
Summary:
Interest rate trends in July 2024 are shaped by the Federal Reserve’s continued emphasis on maintaining higher rates to address ongoing inflation concerns. Contrary to previous expectations of rate cuts, the Fed’s current stance indicates a cautious approach toward monetary easing. The stability in savings account rates, alongside the increase in money market account rates, reflects a broader strategy to manage economic growth and inflation effectively.
From June to July 2024, personal banking interest rates exhibited a combination of stability and slight shifts amidst evolving economic policies. The highest available savings account rate remained unchanged, consistently offering a 6.17% Annual Percentage Yield (APY). Conversely, rates for the highest available money market accounts remained stable at 5.48% APY. This steadiness in money market rates reflects a dynamic financial landscape where certain investment vehicles are maintaining their positions in response to broader economic signals.
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So, what’s up with the Fed lately?
The Federal Reserve has announced an extension of the comment period for its proposal to expand the operating days of its major payment services, the Fedwire Funds Service and the National Settlement Service (NSS). The new deadline is now set for September 6, 2024, moved from the original July 8, 2024. This extension aims to give the public additional time to review and comment on the proposal, which seeks to include weekends and holidays in the operating schedule of these services. Currently, both services operate Monday through Friday, excluding holidays.
The proposed expansion would mean that the Fedwire Funds Service and the NSS would operate every day of the year, maintaining their current daily operating hours—22 hours for Fedwire Funds and 21.5 hours for NSS. The Fedwire Funds Service handles large-value payments, allowing transactions up to $10 billion, while the NSS facilitates settlement services for various private-sector clearing arrangements. This proposal does not affect the Fedwire Securities Service or the FedNow® Service, which is the Federal Reserve’s new retail service for instant payments.
| Type of Account | June Highest APY | July Highest APY | Change (Percentage Points) |
|---|---|---|---|
| High-yield Savings | 6.17% | 6.17% | No Change |
| Money Market | 5.48% | 5.48% | No Change |
Fed’s activity in 2023 & 2024
At its second gathering of 2024, which was held on March 19 and 20, the Federal Reserve failed to adjust interest rates just like it did in its session of 2024 in January. 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%, the highest it’s been in over 20 years.
| 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 savings accounts?
The Fed’s interest rate policy affects the rates on savings accounts, as delineated below:
| Aspect | Description |
|---|---|
| Direct Correlation | Savings 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 savings 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 savings 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 savings accounts. |
| Attracting Deposits | After the Federal Reserve raises its rate, financial institutions often increase the interest they offer on high-yield savings accounts. This is done to stay competitive and attract deposits. Banks want to encourage people to deposit money, and offering higher interest 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 savings account rates but also APRs and APYs on various financial products. |
Expert Insight
In this environment, consumers who want to maximise returns should seek out high-yield savings accounts (often from online banks or fintech companies) and use a combination of savings vehicles, such as short‑term CDs and money market accounts, to maximise returns and access. They should also be vigilant about monitoring the market and willing to switch banks and products in order to capture the best rates.
National savings account interest rates
Key takeaways
- Interest rates for top high-yield savings accounts have remained static at 6.17% APY, while money market accounts remained stable at 5.48% APY from June to July 2024.
- The Federal Reserve is maintaining higher interest rates to address ongoing inflation concerns, signaling a cautious approach toward monetary easing.
- Contrary to previous expectations of rate cuts, the Fed’s current stance aims to manage economic growth and inflation effectively amidst evolving economic policies.
- The Fed’s current rate policy, holding steady at 5.25%-5.50%, reflects a broader effort to stabilize the economy amidst high mortgage rates and persistent inflation.
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