What the Fed’s latest move means for you

livemint.com:

Savers who’ve been enjoying the highest yields in years on bank savings accounts and CDs had been bracing for lower rates. Now they seem likely to get a reprieve. The yields that banks pay are heavily influenced by the Federal Reserve’s interest-rate decisions.

So when the Fed raised rates sharply in 2022 and 2023 to fight inflation, savers reaped the benefit. More recently, inflation has been in retreat. As recently as a few weeks ago, Wall Street expected a round of rate cuts this spring.

But the central bank has struggled to finish the job. It’s now expected to hold the benchmark federal funds rate steady at its March 19-20 meeting and move cautiously for the rest of the year. “ The American saver today is winning, and the longer interest rates stay higher the better it is for them," says Phil Blancato, chief market strategist for wealth management company Osaic.

The upshot: Savers should be able to find rates above 5% through much of 2024 on savings accounts and CDs. On the other hand, the Fed’s interest-rate policy seems unlikely to provide would-be homebuyers facing high mortgage rates much relief. Why the Fed has left rates high The Fed’s war on inflation played out in a series of hikes that moved the fed funds rate from nearly nothing in March 2022 to between 5.25% and 5.5% by July 2023.

The banks most eager to raise deposits jacked up their rates in turn. By the end of last year, inflation appeared to be slowing toward acceptable levels, and early-2024 rate cuts seemed to be in the cards. But it turns out inflation hasn’t slowed quite enough.