The Federal Reserve met this week and refrained from changing the federal funds rate, citing an increased uncertainty on the economic outlook as reason for the wait and see approach. After ending 2024 with three consecutive rate cuts, the Fed has refrained from making rate cuts for the first two meetings of 2025. It also gives savers some breathing room...at least for now.
However, that doesn't negate the fact that inflation continues to place stress on budgets. Core inflation is around 2.8%. While lower than anticipated, the recent CPI report didn't include how tariffs will influence the data.
Bankrate's chief financial analyst Greg McBride remarks, "The Federal Reserve held rates steady, but with rising uncertainty about the economy, they expect slower growth, an uptick in inflation, and less aggressive rate cuts."
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
How to cushion inflation
While you might not be able to withstand inflation's impacts directly, there are ways to cushion your money to reduce its effect. And one of the best options is high-yield savings accounts. McBride adds, "Savers will continue to enjoy returns that outpace inflation if the money is parked in the most competitive savings accounts."
A high-yield savings account allows you to earn a high rate of return. Unlike certificates of deposit, you can add money to these savings accounts at any time.
And you can withdraw or transfer those funds when you need them. Just be careful of any minimum balance requirements that might apply or else your monthly fee might offset the interest earned.
Using this tool from Bankrate, you can see how rates currently measure up:
There are other considerations with a high-yield savings account. Chief among them is they come with variable interest rates. If the Fed decides to cut rates in the future, your savings rates can drop too.
Will the Fed cut rates this year? "Compared to December, the broad consensus still calls for two rate cuts, but more are expecting only one or none at all," remarks McBride.
In the meantime, if you're looking for a flexible way to save money, it's hard to beat the rates offered. Here are some of the top high-yield savings accounts we recommend:
Account | APY | Min. opening deposit |
|---|---|---|
4.50% | $0 | |
4.50% | $5,000 | |
4.45% | $0 | |
4.40% | $100 | |
4.40% | $500 | |
4.35% | $0 | |
4.35% | $100 |
Use budgeting apps to meet savings goals
Sometimes, a fresh perspective on where your money goes helps you identify spending patterns, and with them, opportunities for more savings. Some of our favorite budgeting apps are easy to use, affordable and can help you meet your savings goals.
One of the easiest to use is Quicken's Simplifi. Along with tracking your expenses, the app can anticipate future cash flow, giving you a proactive perspective on your finances. This allows you to adjust your spending to meet your saving goals.
The bottom line
The Fed held steady and refrained from cutting rates at their current meeting. This is great news for savers, as it means you can still secure a higher rate of return.
Against inflation, high-yield savings accounts can help, as they offer a higher rate of return that cushions your finances some from inflation.
Related content
-
Are You a Retirement Millionaire Too Scared To Spend?If you are too scared to spend money in retirement, you may be saddled with regret. Here are three ways to safely enjoy your sizable retirement nest egg.
-
U.S. Treasury to Eliminate Paper Checks: What It Means for Tax Refunds, Social SecurityTreasury President Trump signed an executive order forcing the federal government to phase out paper check disbursements by the fall.
-
Bigger Social Security Checks Are Arriving in AprilPayments to eligible retired public sector employees will increase starting in April due to the Social Security Fairness Act (SSFA)..
-
5 CDs to Put Your Tax Refund IntoPlanning to get a tax refund this year? Treat your future self with a risk-free way to grow your money. Here are the 5 best CDs to consider.
-
Seven Questions to Ask When Evaluating Personal Loan OptionsTaking out a personal loan too hastily could lock you into unfavorable terms with an untrustworthy lender. Ask these questions before signing anything.
-
What Can a Donor-Advised Fund Do for You? (A Lot)DAFs and private foundations go about helping charities (and those who donate) in different ways. Each comes with its own benefits and restrictions to navigate.
-
6 Great Vacation Ideas for Wheelchair UsersThese six places provide plenty of travel inspiration for people who use wheelchairs.
-
Is Chasing the American Dream Ruining Your Financial Life?Too many people focus on visible affluence as a marker of success. Here's how to avoid succumbing to the pressure and driving yourself into debt.
-
What the Senate's Vote to Repeal CFPB Bank Overdraft Fees Cap Means For YouThe Senate voted to overturn the Consumer Financial Protection Bureau's cap on overdraft fees. Here's what you need to know.
-
These Eight States Have the Most Expensive Home Insurance in 2025If you live in one of these eight states, you’re probably paying $1,000 or more above the national average for home insurance.
