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Best Online Savings & Money Market Account Rates 2024

Best Online Savings & Money Market Account Rates

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Fed Funds Rate Raised 25 Basis Points to A 4.50% - 4.75% Target, Says It Still Sees Need for “Ongoing Increases”

The Federal Reserve has raised the Fed Funds target rate by 25 basis points to a target of 4.50% to 4.75%. Like the Fed’s six moves in 2022, today’s Fed move was very well telegraphed by Chairman Jay Powell. However, unlike each of the Fed’s five previously moves that were either 50 or 75 basis points, today’s move represents a raise in he target rate o only 25 basis points.

The Fed also states that it continues to see the need for “ongoing increases” in the Fed Funds rate, indicating that it may still not be near the end of its hiking cycle.

The prospect of slower moves had lead market participants to believe that the Fed’s hawkish tone is ending, with perhaps one further 25 basis point increase after this February 2023 move, and that the Fed would be already acting to lower rates by this time in 2024. That looks less likely now that the Fed is projecting ongoing increases.

The challenge here is quite evident. While some observers can manipulate inflation measurements to show that it has brought inflation under control, you would need to be living in a shell not to realize that sellers of most goods or services with pricing power can continue to gouge their customers.

Hence, the logic applied by many economists is that by its very nature, heightened inflation caused by long periods of tremendous liquidity can only be brought under control only by raising rates to the point where they reigning in the economy and perhaps even cause a recession.

If this logic holds true, several more Fed increases will be coming still. And, it is possible that the fact that the markets have yet to respond adversely to the Fed’s hawkishness will give the Fed further leeway to move further and longer than market participants are projecting.

Consumers should continue to protect themselves through seeking the best savings and money market rates and also keep a close eye on sort-term CD rates.


How to Earn More On Your Cash In 2023

While the rate environment is dramatically different now, the most important piece of advice that I can give as we enter 2023 is the same as that which I would have given in 2022, 2021, or 2020. Get your cash out of non-competitive account. Whereas in past years, that advice meant encouraging people to move their money from accounts paying 0.01% to those paying 0.60%, top rates are now 6 or 7 times higher, making it even more important to act now. The old excuses – “we aren’t talking about a lot of money”, “I am making so much on the market, in bitcoin, etc.”, “it just isn’t worth my time”, “my tax bracket is so high that all the extra earnings will be taxed away anyway” – don’t work anymore. And, with inflation real and present, earning more on your cash gives you a fighting chance on maintaining purchasing power parity.

In short, there is nothing more important than seeking out the most competitive online savings rates and locally available rates. And, if you want further confirmation of this strategy, we recommend at least one competing site.

Even though the Fed is not finished raising rates, many are eager to lock down the certainty in earnings that a one-year, 18-month or two-year certificates of deposit now offer. While short-term US Treasuries have been compelling over the last several months, short-term CDs may become dramatically more compelling as banks and credit unions are forced to seek capital to maintain FDIC and NCUA deposit requirements in early 2023. Do not take it for granted that short term US Treasury will remain above similar duration bank CD rates.

If you are willing to sacrifice liquidity in order to secure an attractive, fixed interest rate for a longer period (3 years, 4 years or 5 years), online bank or credit union CDs are now your best bet. US Treasury bonds are currently offering much lower yields for these durations, even after accounting for their state and local tax benefits. Agency bonds – particularly those offered by Federal Home Loan Bank, Federal Farm Credit Bank and TVA which are state and local tax free - may offer higher rates than CDs, but are always callable after one year or less. Also, they are considered by many to be less secure than CDs (as long as you stay within FDIC and NCUA limits) as there is a moral obligation on the part of the federal government, but not the explicit guarantee that the FDIC and NCUA provide.

There are a lot of ways to earn more in 2023 and we hope you’ll continue to make BestCashCow part of your strategy.

Happy New Year!


Fed Funds Rate Raised 50 Basis Points to A 4.25% - 4.50% Target; 5.10% Is the New Median Target

The Federal Reserve moved to raise the Fed Funds rate by 50 basis points to a target of 4.25% to 4.50%. The move was well telegraphed by the Fed and completely anticipated by the markets. The move follows four consecutive 75 basis point hikes, and means that the Fed ends 2022 with a full 425 basis points of rate hikes (having begun its hikes from a rate of 0 to 25 bps earlier in the year).

The Fed’s hawkishness caught markets on edge after a presentation by Powell indicated that inflation was decelerating and led many market participants to believe that the Fed can slow its actions.

Rather, Powell has been very clear. Multiple, ongoing rate hikes will be appropriate. While he says that he and the Fed haven’t made a judgment about whether a 25 or 50 basis point hike in February will be appropriate, the consensus is that the Fed needs to get to a final (or terminal) rate much higher than had been previously estimated.

The new target terminal rate for later is 2023 is 5.10%, with 17 of 19 FOMC participants believing that the peak rate will be over 5%. In fact, several Fed officials see 2023’s rate at 5.40% or higher.

Powell and the Fed are fully committed to getting the core inflation rate down to 2% as quickly as possible. They are clearly deeply concerned about the burden on the lower and middle classes of an inflation scenario that continues to significantly affect housing, basic food and transportation costs across the board. He hopes to see this inflation be brought down to 3.50% by the end of 2023 at which point the Fed will begin to consider a shift in its policy.

There is clearly a debate among economists about whether the 2% inflation target in reasonable or attainable within the next several years. There is a risk that Powell’s Fed will break the economy in order to attain this goal. However, for the moment, it seems that the Powell Fed is going to be true to its goal of price stability in 2023, and that we will see higher savings rates and CD rates.