Current Savings Account Rates September 2024
Last updated 11/04/2024 by
Benjamin Locke
Edited by
Andrew Latham
Summary:
In September 2024, interest rate trends reflect the Federal Reserve’s recent decision to cut rates by 25 basis points, marking the first reduction in over four years. This shift comes as the Fed pivots its focus from strict inflation control to supporting economic growth amid signs of slowing job growth and stable inflation indicators. Despite the rate cut, savings account and money market account rates remain unchanged, illustrating the cautious response of financial institutions to the Fed’s monetary policy adjustments.
From August to September 2024, personal banking interest rates largely held steady, reflecting ongoing stability in the economic landscape. The highest available savings account rate remained at 6.17% Annual Percentage Yield (APY), unchanged from the previous month. Similarly, rates for the highest available money market accounts continued to be stable at 5.48% APY. This consistency in savings and money market rates emphasizes a financial environment where certain investment vehicles are maintaining their positions in response to the Fed’s recent actions while adapting to the broader economic context of moderated inflation and growth support.
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So, what’s up with the Fed lately?
In September 2024, the Federal Reserve implemented its first interest rate cut in over four years, reducing the target range by 25 basis points to 5.00% to 5.25%. This decision follows a period of stable inflation, as indicated by the Personal Consumption Expenditures (PCE) index, which rose by 0.2% in July and maintained a year-over-year increase of 2.5%. Core PCE, excluding food and energy, also increased by 0.2% for the month, with a yearly rise of 2.6%.
Despite a slight increase in personal income by 0.3% and consumer spending rising by 0.5%, the savings rate fell to 2.9%, marking the lowest level since June 2022. While goods prices remained stable, service costs showed a monthly increase of 0.2% and an annual rise of 3.7%. The PCE report, coupled with market predictions, pointed to a strong likelihood of a rate cut, which the Fed executed in September to support the labor market amidst signs of slowing job growth.
The Fed’s focus has shifted from strict inflation control to fostering economic growth, balancing the need for a robust labor market while responding to the evolving economic landscape. This approach reflects a significant pivot in monetary policy as the central bank navigates the challenges of maintaining stability in a changing economy.
| Type of Account | July Highest APY | August 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 | 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. |
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 continue to be stable at 5.48% APY as of September 2024.
- The Federal Reserve recently cut interest rates by 25 basis points, shifting its focus from controlling inflation to supporting economic growth amidst signs of slowing job growth.
- Despite the rate cut, the Fed’s cautious approach indicates that it aims to manage inflation effectively while navigating evolving economic conditions.
- The Fed’s current target rate policy now stands at 5.00%-5.25%, reflecting ongoing efforts to stabilize the economy in light of high mortgage rates and persistent inflationary pressures.
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