The Federal Reserve has delivered the rate cut that many analysts were expecting, lowering the federal funds rate by 0.25 percentage points. This brings the target range to 4.00% to 4.25%. While this move is likely to make loans cheaper, it will also impact savers, particularly those with money in high-yield savings accounts. If you’re earning a solid rate on your savings, you may see those returns begin to fade.
Why Savings Yields Will Likely Fall
When the Fed lowers rates, banks often adjust their savings and CD (certificate of deposit) yields accordingly. While the change may not be drastic right away, the top savings account rates — currently over 4% — are expected to dip. If you’re not already earning a competitive rate, now might be the time to act before those yields decline further.
High Rates Are Dipping, But Not Disappearing
The U.S. economy has shown signs of slowing productivity and rising unemployment, prompting the Fed to ease its rate policy. Federal Reserve Chair Jerome Powell hinted at potential rate cuts in a speech in August 2025, signaling that a shift in policy could be coming. Today’s decision made that shift official.
While today’s rate cut marks the first reduction of 2025, it’s relatively modest. What Savers Should Do After the Fed’s First Rate Cut in 2025 It’s worth noting that banks will likely lower their deposit rates, but that doesn’t mean there won’t be any good savings options left.
“We’ve spent much of the past 17 years in a zero-rate environment, so when rates start to fall, we often assume they’ll go all the way back to zero,” says Adam Stockton, head of retail deposits at Curinos, a banking analytics firm. “But that’s probably not the case.”
In fact, the Fed’s June projections suggest its long-term target rate will be around 3.00% to 3.50%. That means future rate cuts are expected to be relatively small. Stockton adds that barring a major financial crisis, deposit rates shouldn’t drop to zero — but they could still decrease, so it’s important to stay on top of your savings options.
How to Navigate Lower Savings Rates
Currently, the best high-yield savings accounts offer around 4% APY, according to NerdWallet. While these rates will likely decrease, the Fed’s 0.25-point cut means we’re unlikely to see drastic shifts right away. If you’re looking to park your cash and earn interest, a high-yield savings account is still one of the best options available. What Savers Should Do After the Fed’s First Rate Cut in 2025
To make sure you’re getting the best rate, Stockton recommends checking your account’s APY regularly, maybe once a month, to ensure it remains competitive. If it’s no longer offering a good return, consider switching to a higher-yield account. The earlier you move your money, the more interest it can earn due to compound growth.
Don’t Miss Out on High-Yield CDs
For those willing to lock their money away for a set period, CDs offer some of the highest rates available today. The best one-year CD rates are around 4.10%, while top five-year rates hover around 3.80%, based on data from NerdWallet. However, these rates won’t last forever. As with savings accounts, CD yields are expected to dip, so it’s crucial to act fast if you want to secure one of these rates.
CDs offer fixed interest rates, meaning you’re guaranteed consistent returns for the duration of the term. However, remember that early withdrawals often come with penalties that could reduce or erase your interest earnings. CDs are ideal for savings you don’t plan to touch for months or years.
Act Before Rates Drop Further
It’s not too late to open a high-yield savings account or lock in a CD rate before they start falling. With the next Fed meeting scheduled for late October, there’s a chance rates could drop again, so it may be worth acting now if you want to make the most of these high yields.
Stay proactive about your savings to ensure you’re getting the best returns before the Fed’s policy shifts impact your interest rates.
