The next rate hike from the Fed could be huge. One simple way to make money

Some professionals are speculating that the Federal Reserve may raise interest rates by 1% at its July 26 meeting.

Getty Images / istockphoto

Experts predict that the Federal Reserve will raise interest rates at its meeting on July 26, in an effort to curb rising inflation. Barron’s latest story noted: “With inflation so high, the next rate hike by the Fed may be the biggest in decades,” and other sources predict the size of the rate hike (it looks likely to be 75 basis). interest rate points, Reuters reports). At least one group of Americans has already benefited from these price hikes, and will do so in the future: savers. (You can find some of the best savings account rates here.)

In fact, previous interest rate hikes have already benefited savers with higher rates on checking and savings accounts and certificates of deposit (CD), says Chanelle Bessette, a banking specialist at NerdWallet. “Consumers can take advantage of these price increases by shopping for a new account, with better interest rates, especially since higher interest rates can help mitigate the effects of higher inflation,” Bessett says.

Currently, the most competitive online banks are constantly outpacing each other, raising rates for savings accounts and CDs. “The highest-yielding savings accounts are at 2% and CDs can draw 2.5% on a CD for a year or more than 3% at maturities of three years or more. Cadence rates are up,” says Greg McBride, chief financial analyst at Bankrate. These elevated watermarks will be bypassed quickly.

What will happen to interest rates on savings accounts and CDs in the future?

McBride says continued aggressive interest rate hikes will maintain the momentum we see in improving savings returns. In fact, McBride says returns on savings accounts and CDs are poised to improve further in the coming months. “With the biggest improvement seen in savings accounts, money market accounts and CDs with maturities of two years or less,” McBride says. You can find some of the best savings account rates here.)

But, he adds, “while the higher yields on savings are certainly welcome, inflation will still have to come down in a significant way before these better returns really emerge.”

It is certain that not everyone with a savings account will see their accounts increase as a result of this rise. In light of the 1% rise, many savers need attention. Different banks may increase rates at different rates over time, says Natalia Brown, chief customer operations officer at National Debt Relief (NDR).

Like McBride, she has warned of how purchasing power will decline if rates remain below rising inflation. “For people with increasing debt, even those with a savings account, this rise worries me because many people are struggling to pay off existing debt while managing rising living expenses, as we saw a 9.1% increase in June according to the CPI report,” he says. Brown. In the end, trying to save in the current environment will become more difficult to get value.

However, professionals say it’s worth the effort, noting that everyone should have 3 to 12 months of expenses in an emergency fund, even if the rate does not exceed inflation. “It’s important to have liquid savings no matter what’s going on in the economy, and even more so if it ends up going downhill,” Bessett says.

Leave a Reply

%d bloggers like this: