Fed Rate Cut to Impact Savings, Yields Expected to Drift Lower

The Fed has cut its benchmark rate by a quarter point, its first reduction in 2025, and released a new quarterly rate forecast. This rate cut will likely push deposit rates lower, including savings, money market, and CD rates. The Fed's median forecast projects another 0.50 percentage points in cuts by year-end. Despite the cuts, savings and CD yields remain historically strong compared to the past decade. Savers can still earn high returns with high-yield savings accounts or lock in a high rate with a top nationwide CD.

The Federal Reserve (the Fed) has reduced its benchmark interest rate by a quarter point, marking the first rate cut of 2025. The decision was made in response to a weakening labor market and the need to balance inflation concerns Fed rate cut to mark pivot toward job market^[1].

The new rate, set at a range of 4.00% to 4.25%, is expected to push deposit rates lower, affecting savings, money market, and CD (certificate of deposit) rates. The Fed's median forecast projects an additional 0.50 percentage points in cuts by year-end, suggesting further rate reductions are likely Federal Reserve cuts interest rates for first time this year, sees 2 more cuts in 2025^[2].

Despite these cuts, savings and CD yields remain historically strong compared to the past decade. Savers can still earn high returns with high-yield savings accounts or lock in a high rate with a top nationwide CD. For instance, high-yield savings accounts currently offer rates around 0.50%, while top nationwide CDs can yield up to 1.00% Fed rate cut to mark pivot toward job market^[1].

The Fed's decision was made in a split vote, with some officials preferring a deeper reduction and others advocating for holding rates steady. The central bank is balancing concerns about a potential downturn in the labor market with the risk of accelerating inflation due to tariffs Fed rate cut to mark pivot toward job market^[1].

The Fed's latest economic projections show inflation rising to 3.1% and GDP growth at 1.6%. The unemployment rate is expected to tick up to 4.5%, reflecting a slowing labor market Federal Reserve cuts interest rates for first time this year, sees 2 more cuts in 2025^[2].

In summary, the Fed's rate cut is aimed at supporting a weakening labor market, with further cuts expected by year-end. Savers should expect lower deposit rates, but historically strong yields remain available for those willing to lock in high rates with high-yield savings accounts or CDs.