The Federal Reserve has raised the Fed Funds target rate by 75 basis points to a target rate of 3.00% to 3.25%. This is the highest it has been since 2008.
The rate represents the third successive 75 basis point rate increase as the Federal Reserve moves desperately and late to try to get control of inflation in the US. The rate is now dramatically higher than it was at the beginning of 2022, at which point Fed Chairman Jerome Powell was still holding its target at 0 to 0.25% as part of its COVID-19 emergency stimulation measures.
More importantly, the Fed has sharply raised its Fed funds target for the end of 2022 and into 2023. Its target rate for the Fed Funds future rate in three months time is now 4.40% (versus earlier guidance of 3.40%), meaning we now have another 125 basis points or so of additional rate hikes in October, November and December. And, into 2023, the Fed will hold rates higher for longer to fight inflation.
As the Fed Funds rate increases and as liquidity is removed from the system, you should expect to see more competition for your cash. If you bank is not increasing its savings rate commensurately in order to stay competitive, consider moving to a more competitive online savings or money market account.
Most major online savings and money market rates can be opened in a matter of minutes through their website or mobile application. Compare the best rates among these online banks on BestCashCow here.
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