On Wednesday, the Federal Reserve made the decision to keep rates slow once more. Although it may seem like boring financial reports, you may not realize how important it is. The central bank’s decision-making system, the Federal Open Market Committee, meets frequently to decide monetary policy and adjust the federal funds rate, which have an impact on the cost of lending between lenders.

It made the decision to maintain the standard rate’s range of 4.2 % to 4.45 % this month. When interest rates are high, as they are today, businesses must pay more for loans, mortgages, credit cards, and other financial products. Some banks, in addition, give better returns on your deposits and cash held in their institutions.

The Fed doesn’t directly dictate how much money banks can borrow or paid for savings accounts, but it does tend to have a positive impact on customers. In other words, high interest rates can increase the yield on your assets and income. Simply put, you’ll require the appropriate accounts. How will the most recent decision from the central bank impact your hard-earned income.

How the federal funds rate affects your finances

One method the Fed can use to combat prices is lowering the federal funds rate. The central bank raises interest rates when customer prices are high to prevent borrowing and, in turn, to thaw the market. That’s the style that we observed between the years of 2022 and 2023. When inflation is more or less under control but unemployment is high, the Fed lowers interest charges to make it easier and more appealing for homes to invest money. In the latter part of 2024, the Fed cut three rates.

We’ve all been waiting for more rate reductions, but the Fed has kept rates low this year so far to see how President Donald Trump’s policies, particularly tariffs, impact the economy. The Fed is scheduled to hold its second meeting on July 30; however, interest rates won’t likely be cut until September. Expect to receive a lower annual percentage yield on some saving accounts when those price cuts occur.

Holding prices higher gives your pocketbook a raise

Take a moment to evaluate your savings plan before making any financial decisions this year. First, check the location where your income is being parked. Traditional savings accounts with brick-and-mortar lenders typically offer the lowest returns on your savings, at best 0.02 %. If you want to keep all of your income in one lender, these accounts are frequently combined with your checking account.

However, I suggest a high-yield savings account if you want to profit from the high-interest level environment. Online banks and credit unions typically offer high-yield savings accounts, some with APYs of between 3 % and 4 %. Because those charges are variable, they may drop over the course of a few months, especially if the Fed decides to cut costs. However, if you get a better price than you would at a conventional lender, you’ll still earn more money again. If you’re no persuaded, check out this comparison table.