Is It Worth Getting a High-Yield Savings Account Before the Fed Meeting?

With many high-yield savings accounts (HYSA) offering APYs of 4.5% and above, now is a great time to make the most of your savings through compound interest. If you haven’t opened one yet, it’s worth considering — especially ahead of the next Federal Reserve meeting.

In December 2024, the Fed reduced the benchmark interest rate by 25 basis points, marking the third consecutive rate cut following a 50 basis point reduction in September and a 25 basis point cut in November. However, recent economic indicators, including persistent inflation and economic growth, have led to a more cautious approach regarding further rate adjustments. Economists and market analysts speculate that the Federal Reserve will maintain the current federal funds rate at its meeting on January 29, 2025.

With the Fed expected to hold rates steady for now, there’s still a window of opportunity to lock in competitive returns on your high-yield savings and CD accounts.

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Why it’s worth getting a high-yield savings account before the next Fed meeting

While opening a high-yield savings account before the next Fed meeting won’t lock in current rates, as the APY on these accounts fluctuates with the market, it’s still worth it to open one. 

Yes, rates will fall even more when the Fed begins cutting interest rates, but they’ll still remain far higher than those of a normal checking or savings account. So even when rates eventually drop — which they'll do gradually over time as the federal funds rate is lowered over time — you’ll still miss out on potential earnings by not saving your cash in one of these accounts.

If your high-yield savings account has an APY of 4.50%, after the Fed makes its first rate cut, you can expect it to drop to 4%, according to the Motley Fool. While that's lower than now, it is still a great rate, considering the national average savings account is only 0.61%, according to Bankrate. 

If you were to save $10,000 in an account with a 4% APY, you’d earn $400 in interest after just one year of savings, with no effort on your part. With an APY of 0.61%? You'd earn just $61 in interest. That’s a $339 difference, and all you have to do is take five minutes to open a high-yield account, which is super simple. And remember, with the power of compounding, the earlier you start investing, the better your returns will be. 

You’ll open it the same way you’d open a traditional account, except you may have to forgo your brick-and-mortar bank for an online bank or credit union, as these are where high-yield accounts with the best rates are typically offered.

Compare rates on high-yield accounts by using our tool below:

When to consider a CD account

Unlike high-yield savings accounts, CD accounts offer a fixed APY. This means that if rates go down (which they will) after you've opened a CD, your earnings won't be affected. 

While opening a CD account can be a smart way to take advantage of high rates for as long as possible, there's one caveat: You'll need to make sure you don't make any withdrawals before the CD matures. Doing so will result in fees that can offset any interest earned (unless you have a no-penalty CD account).

You can compare CD rates by using our tool below. Before opening one, however, make sure you choose a maturity date that makes sense for you financially.

The bottom line

Taking advantage of today’s high-yield savings and CD account rates can help you maximize your earnings. Although the Fed is expected to hold rates steady at its upcoming meeting, future cuts could lead to lower returns on savings accounts. By acting now, you can secure a competitive rate and make the most of your savings before any shifts in monetary policy impact future returns.

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