What Today’s Fed Move—and Predictions—Mean for 2025 Savings and CD Rates

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What the Fed Did Today

As expected, the Federal Reserve’s rate-setting committee announced today that it’s lowering the federal funds rate by another 0.25 percentage points, bringing the target range down to 4.25%–4.50%. This is the third consecutive meeting in which the central bank has cut its benchmark rate—with a larger half-point reduction announced on Sept. 19, followed by a quarter-point cut on Nov. 7.

Previously, the Fed implemented a historic rate-hike campaign to fight decades-high inflation. Comprised of 11 rate increases between March 2022 and July 2023, the ascent raised the fed funds rate a cumulative 5.25 percentage points, taking it to its highest level since 2001. The Fed then held its benchmark rate there for 14 months before making its first cut in September this year.

Now that inflation has cooled, the central bank has pivoted to lowering its benchmark rate. In its official statement today, the Fed indicated its gradual 0.25-point reduction comes in light of unemployment and inflation risks being “roughly in balance,” but with an inflation rate that has “made progress toward the Committee’s 2 percent objective but remains somewhat elevated.”

As it commonly does, the Fed also indicated that the rate-setting committee would make future decisions on a meeting-by-meeting basis.

“In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” the Fed said in its statement. “The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.”

Future Rate Cuts Are Expected, But Scaled Back

Every three months, the Fed’s rate announcement includes a “Summary of Economic Projections.” The latest installment was released today, and all eyes are on the “dot plot” forecast it contains. The chart is so-named because it represents each Fed committee member as a nameless dot and lays out on a graph where each predicts the federal funds rate will be at the end of upcoming years.

Today’s dot plot shows that across the 19 Fed committee members, the median projection is for an additional 0.50-point rate cut across the meetings of 2025. Fed committee members also predict a further half-point reduction in 2026. If that comes to fruition, it would result in a federal funds range of 3.25%–3.50% vs. the 4.25%–4.50% target announced today.

That’s down, however, from where central bankers pegged the fed funds rate three months ago, the last time they provided a dot plot forecast. In September, they projected four 2025 rate cuts vs. the current forecast of just two.

When asked about future rate cuts during his customary post-announcement press conference, Federal Reserve Chair Jerome Powell responded that the cuts they’ve made so far have been significant enough that the committee can likely slow the reductions going forward.

“With today’s action, we have lowered our policy rate by a full percentage point from its peak, and our policy stance is now significantly less restrictive,” Powell said. “We can therefore be more cautious as we consider further adjustments.”

He reiterated that future rate decisions would be based on data available at that time, and “not be because of anything we wrote down today. We’re going to react to data.”

“As for additional cuts, we’re going to be looking for further progress on inflation as well as continued strength in the labor market. And as long as the economy and the labor market are solid, we can be cautious as we consider further cuts,” Powell said.

How Will This Affect Savings and CD Rates?

The Federal Reserve doesn’t set consumer interest rates itself. However, the level it establishes for the federal funds rate directly impacts the interest that banks and credit unions are willing to pay for savings, money market, and certificate of deposit (CD) accounts. When the Fed’s benchmark rate is high, interest rates for bank customers are elevated as well. The reverse is true when the federal funds rate is low.

When there’s a strong expectation that rates will be moving lower, many banks and credit unions opt to lower their CD rates in anticipation without waiting for an official Fed move. That’s because CDs offer you not just a rate today but a future-rate guarantee—and institutions don’t want to get locked into paying CD rates they’ll regret down the road. As a result, we’ve seen the best CD rates drift lower for about a year now, which is expected to continue.

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Savings account rates, on the other hand, behave a bit differently. Since banks and credit unions can lower them at the drop of a hat, savings accounts are free from the rate commitment a CD provides. As a result, high-yield savings account rates are a little less likely to move in advance of Fed announcements, often instead waiting to change until the central bank has announced a move.

Are High-Yield Savings Accounts and CDs Still Worth It?

While it’s true savings and CD rates are going to keep marching lower as a result of Wednesday’s Fed move—and will likely continue downward if the central bank implements additional rate cuts in 2025 and beyond—it still always makes sense to earn a rate that’s competitive at the current time.

If you have cash savings in a bank account that’s paying little to nothing, moving it to a high-yield savings account will start delivering monthly interest payments that essentially amount to free money. And the sooner you can move to one of today’s best high-yield savings accounts, the sooner you’ll put your savings to work.

If you can also commit to not touching some of your money for months or even years, one of today’s top-paying CDs is an even smarter move. While savings account rates will fall along with the fed funds rate, a CD you open now will have a guaranteed rate that can’t be changed. By shopping our daily ranking of the best CD rates, you can choose from dozens of great options that pay between 4% and 5.50% on terms lasting until 2025, 2026—or even as long as late 2029.

But don’t delay, as the available APYs on CDs tomorrow or next week could be worse than today—with any CD offer possibly evaporating overnight. So, as soon as you find a top CD you like, lock it in quickly so you’re guaranteed that rate far down the road.

How We Find the Best Savings and CD Rates

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account’s minimum initial deposit must not exceed $25,000.

Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don’t meet other eligibility criteria (e.g., you don’t live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.