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Online Savings & Money Market Account Rates 2023

Online Savings & Money Market Account Rates

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Fed Funds Rate Raised by 75 bps to a 2.25%-2.50% Target; Savings Rates Should Get Sweeter

Rate information contained on this page may have changed. Please find latest savings rates.

To absolutely nobody’s surprise, the Federal Reserve has voted unanimously to raise the Fed Funds rate by 75 basis points today, setting a Fed Funds rate target of 2.25% to 2.50%.  The move follows a similar 75 basis point increase six weeks ago and is the Fed’s fourth move since beginning the year at a 0-0.25% target.

We’re still suffering from a Fed that held rates at zero for too long in the aftermath of the pandemic and then has moved too late and too slowly to address the inflationary pressures caused by Putin’s invasion of Ukraine.

While this will be the Fed’s last move until September, the Fed Funds rate is still likely to be at least one percent higher than where it is right now at the end of the year as the Fed tries to play catch up.

Savings and money market accounts will probably move up toward the new Fed target, although some well-known online banks are flush with deposits and are not moving aggressively.  We have seen banks stall out, such as Purepoint which is still at 0.40% APY, in spite of having been one of the most aggressive competitors for your online deposits just three years ago!  For this reason, it is important to regularly compare your online savings rate with the best rates here.

We’ve seen a lot of skepticism about savings accounts and the value of getting 2% on your money while inflation is burning at 9% plus.   The difficulty in maintaining purchasing power parity underscores the insidious nature of inflation, and how important it is for the Fed to move still more aggressively to get it under control.  And, while you may be losing purchasing power, a guaranteed 2% is a whole lot sweeter than anything we’ve seen for a while.  It is well worth reaching for, especially in a bubbly environment where asset prices in the US are still stretched.

Cash is Trash No More - Federal Reserve Moves Fed Funds Rate Up by 75 Basis Points to A Range of 1.50% - 1.75%

The Federal Reserve has finally become much more serious about controlling inflation.   Inflation has gotten so hot by any measure, including core CPI, that Jay Powell can no longer keep his head in the sand.   His Fed is pulling trillions in liquidity out of the market by reducing the size of its balance sheet and moving the Fed Funds rate up by 75 basis points to a range of 1.50% to 1.75%.   And, there is more to come.    

Powell now says that the July meeting will involve either a 50 or a 75 basis point increase in the Fed funds rate and that additional rate increases in 2022 will be warranted.   The Fed’s own Fed funds forecast now puts the Fed funds rate at 3.40% by the end of 2022 and 3.80% by the end of 2023.   

Historically, periods of extreme inflation are not necessarily appropriate times to be in cash.   Real assets, like real estate and equities, can perform better as a means to maintain and store value.

This time is different.   It is coming on the heals of a decade of Fed-induced real asset price inflation – and a bubble in speculative assets, including crypto – that has become especially exacerbated since the pandemic started in 2020.     These bubbles are all going to need to be unwound as the Fed moves aggressively to normalize the economy and to protect it from continuing to be overcome by inflation.    Perhaps it can be done without causing a recession (as argued by Ben Bernanke in today's New York Times).   But, against the concurrent backdrops of an economy that is now dramatically slowing, Russia extending its war in Europe, an ongoing insurrection in the US, and a global climate crisis becoming a climate catastrophe, we may not see much in the way of other safe real assets that maintain value until valuations are fully reset.

Savings rates and CD rates are rising and these products seem like attractive places to sit for while.

Federal Reserve Moves Fed Funds Rate up By 50 Basis Points to a Fed Funds Target of 0.75% to 1.00%

Rate information contained on this page may have changed. Please find latest savings rates.

The Federal Reserve has finally begun to act according to its mandate to maintain price stability, but inflation is already running rampant.  Today’s move is just the beginning of moves that will be necessary.  The Fed’s statement left us with little in the way of guidance in terms of how far and how fast it is going, but Powell’s press conference did not.

Powell addressed the American public by saying that inflation is much too high and supply chain disruptions are being exacerbated by Russia’s invasion of Ukraine and the COVID lockdowns in China.  In other words, it is possible that we still haven’t seen peak inflation.  

Powell himself seems to believe the Fed is way behind the curve and is going to need to be very hawkish.   Whereas economists had previously looked for another 50 basis points move at the conclusion of the June 14-15 meeting, and 25 basis points at each of its four remaining meetings, Powell introduced the possibility that there may be a series of 50 basis point moves through the year.  Depositors can expect much higher rates in savings and money market accounts after today’s move and through the year.

You may want to bookmark BestCashCow’s online savings page here.   You should also consider savings rates where you live here.   

Alternatively, you may wish to follow savings rate changes through, our partner site that displays online and local rates on a single table.

CD rates are also obviously going up.   We warned about rushing into CDs last week in this article.    Rates have gone up since then with leading 1-year CD rates above 2% and 5-year CD rates now above 3%.   CD rates will get more and more tempting, especially when we have not seen anything for cautious investors to even nibble on since the beginning of the pandemic.

Before jumping into a CD, folks need to play around the CME’s Federal Reserve Open Market Committee’s Fedwatch tool here.   It demonstrates the probabilities assigned by to different interest rates by economists’ targets at the end of each upcoming Fed meeting.   As of this writing, it indicates a 79% probability of a target rate of 3.25% to 3.50% following the December meeting, some seven months from now, and a 92.5% probably that we will be at that level following the July 2023 meeting.

Plenty of well known and respected economists, like Harvard’s Ken Rogoff, think the Fed is going to need to move much further and much faster in order to get the “perfect storm” of inflation under control.   

Whatever happens, it should be an interesting year for savings and CD rates.