The Federal Reserve raised the Fed Funds rate by 25 bps to a target of 1.75% to 2% this afternoon. The move marks the seventh such move since the Fed began moving the Fed Funds rate from zero in December 2015, and the second in Jay Powell’s tenure as Chairman. Barring some sort of dramatic and unforeseen development it won't be the last raise.

The Fed’s language became more hawkish with the Fed raising median outlook for 2018 since it last meeting. The Fed is now guiding towards two more rate hikes (instead of 1) before the end 2018 (for a total of 4 versus 3 hikes in 2018). While the long-range Fed funds forecast remains at 2.90%, the Fed funds rate is now forecast at 3.125% at the end of 2019, and 3.375% at the end of 2020.

Against this backdrop, BestCashCow continues to find savings and money market accounts and short-term CDs substantially more attractive than longer-term CDs and bonds.

Here are five products worth taking a look at:

1. CIT Bank Online Money Market – 1.85%

CIT Bank has been around for a long time, and is generally very positively reviewed on BestCashCow. Over the years, they have always been faster to move their savings and money market rates than others, and their savings rate is currently one of the highest. With only $100 required to open an account, CIT works for just about everyone.

2. CIT Bank 11-Month No Penalty CD – 1.85%

If you are a contrarian and believe that savings rates may fall over the coming year, or have seen enough over the last decade that you want to protect yourself from that unlikely eventuality, CIT Bank is also offering a solution for you in the form of an 11-Month No Penalty CD.

While this product pays the same as CIT’s online money market account, it guarantees that it will pay that amount for almost a year. In the meantime, it can be terminated and moved to the money market account at any time and without penalty. With this product, CIT is essentially offering depositors a free option.

3. Radius Bank Online Savings – 1.86%

Radius Bank is a new entrant to the online savings arena, but seems to be committed to making it work. The 1.86% online savings rate is only good for depositors who bring $25,000 or more; the bank is worth a look as this account can be easily partnered with a high interest checking account packed with features that can enable depositors to migrate virtually all of their branch banking to online banking.

Editor’s Note: Radius Bank is an advertiser on BestCashCow. Please read our Advertiser Disclosure here.

4. Purepoint Bank Online Savings – 1.90%

Purepoint has to be listed here because they currently have a 1.90% online savings rate. However, Purepoint may not work for everyone as they haven’t always been so fast to raise their rates and they may be focused more on trying to build out a branch network.

5. Marcus One-Year CD – 2.30%

While the direction of rates is clearly up, there is little risk in locking some money that you won’t need into a one-year CD, and there may even be a small upside. Marcus, the online banking division of Goldman Sachs, has recently raised all of their CD rates and is now offering a 2.30% one-year CD. Marcus is well reviewed by BestCashCow users, and as we noted in our May 2018 note, Goldman Sachs’ ownership and commitment to the space makes it a good and a safe place to do your baking business.

Editor’s Note: Marcus is an advertiser on BestCashCow. Please read our Advertiser Disclosure here.

Rates can change. See the latest online savings and money market rates here. See the latest online one-year CD rates here.

When I was in business school, I was taught that an inverted yield curve is an extraordinary precursor of a recession. Indeed, the empirical evidence is there. Of the five recessions since 1980, all have been preceded, by 6 to 18 months, by an inversion of the 2 and 10-year Treasury rates.

The yield curve now is getting close to flat (it is not inverted), and that is causing a lot of economists to appear on Bloomberg and CNBC fretting about a potential recession as early as late 2018.

What causes the correlation? Could this time be different?

I think, this time, that the inverted yield curve could be sending a different signal.

First, I am looking at the cause of the flattening yield curve. In particular, this time the compression of the yield curve is clearly caused by a true global debt environment. For the last decade, as the US has been recovering, 10-year and longer US Treasury bonds have been purchased by the Chinese and other purchasers. While this has enabled the US to fund its extraordinary debt and deficit in a way that might not otherwise have been possible, it has also prevented US government debt rates from expanding to offer a rate of return on long term debt that might be reasonably expected. Extraordinarily low inflation in the US has also been a factor.

Even as short-term rates have come up, there has been steady demand preventing long-term rates from going up as well. When the US 10-year moved above 3%, a couple of weeks ago, the dollar strengthened dramatically against every major currency as foreign accounts moved into dollars to chase yield. In fact, low long-term debt yields globally may continue to compress US debt rates, even as inflation creeps up

Second, I am looking at why a yield curve has led to past recessions. The fact that banks borrow at short-term rates and lend at long term rates and that banks have been pressured when the yield curve compresses or inverts has been a factor in each recession (and was the major cause of the 2008-2009 crisis).

But, in the post-crisis world, the major money center banks are operating in a way that involves much less interest rate risk. The major money center banks are lending short term with instruments like credit card loans at much higher rates than ever before. They have issued home equity loans that are more tied to short-term rates (see rates here). And, many of them are still making fortunes by paying 0.01% to 0.03% on deposits (you can get a better rate on short-term savings and money market accounts here). To boot, they have issued billions of dollars in structured notes that provide a hedge from interest rate risk and enable them to pay nothing for their capital for the full duration of an inversion.

So, I would submit that this time could be different, and while interest rate movements affect your own finances, the compression and possible inversion may say very little about the US economy.

As we begin May 2018 and approach the second and third meetings of Jay Powell’s tenure as Chairman of the Fed, we are continuing to see savings rates firm up.

While savings rates are improving, they are not where we expect to see them this time next year and still well below any historical norm. To boot, the yield curve is lacking slope. So while BestCashCow is the most comprehensive site listing savings and CD rates, we continue to urge caution when it comes to CD rates, especially those longer than one year.

This month, we’d therefore prefer to focus just on five savings and money market products that we find particularly interesting. We’re highlighting these products not only because the current rates are attractive, but because there has been some discussion in our conference rooms about banks that offer teaser rates and then lower them. We don’t believe either that these five banks have engaged in such tactics or that they will be lowering their rates as the Fed moves the Fed Funds rate higher.

So, here are five savings accounts that we would bet will continue to be competitive.

1. EBSB Direct – 1.80% Online Money Market rate

EBSB Direct is a familiar name to many who have followed the online deposit account space for the last few years. At various points, they have aggressively courted savers, and this rate represents a consistency in that approach. Earlier this year, their rate had been 1.57% and 1.44%. EBSB Direct has great reviews on BestCashCow. High net worth depositors will appreciate the fact that the rate is extended to all deposits up to $2 million, and that as a subsidiary of East Boston Savings Bank, a Massachusetts chartered bank, DIF insurance covers that amount.

2. Purepoint – 1.75% Online Savings rate

We wrote about Purepoint in April and we have written about the bank before. As a subsidiary of one of Japan’s largest financial institutions and as an aggressive player in the US market that seems determined to gain market share, we’d bet on Purepoint to continue to raise rates as the Fed moves.

3. Marcus – 1.60% Online Savings rate

With generally outstanding reviews on BestCashCow, we think that Marcus is a good place to stash cash. Marcus is also a subsidiary of Goldman Sachs and if you listen to their executives on Bloomberg or CNBC, you’ll see that they have made a real commitment to the online savings and CD spaces and we doubt they will be doing anything other than raising rates as the Federal Reserve moves. To boot, Marcus is perhaps the only one of the major online banks where it seems very safe to go well over FDIC-insurance limits.

Editor’s Note: Marcus is an advertiser of BestCashCow. Please read our Advertiser Disclosure here.

4. Personal Savings by American Express – 1.55% Online Savings rate

Amex’s online savings product was once the highest rate around in 2009 and 2010 when they were offering 0.90% while other rates had fallen below that level. While Amex hasn’t been as quick to raise rates out of the zero-rate environment as many others have, their reviews on BestCashCow indicate that they provide outstanding customer service. It certainly isn’t a bank that is going to be treating its current long-standing savings customers any worse than new customers.

5. Ally Bank – 1.50% Online Savings rate

While Ally occasionally offers some great 11-month No Penalty CD products, the rate on their savings account has trailed their competitors a little bit for the last half a year. That’s OK, because we have every bit of confidence that Ally will always remain among the highest offered savings rates. We also know that they won’t be quietly lowering their savings rates while they give new customers better ones. Their TV advertisements promise as much.

Before opening an online savings or money market account, we also encourage you to check local bank rates and local credit union rates.