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What another Fed rate hike could mean for your savings

One bright side to another interest rate hike? Higher earnings on your savings. /Getty Images

Interest rate hikes are nothing new. They've been a persistent theme since March of 2022 as the Federal Reserve attempts to tamp down inflation. And although we had a brief reprieve with June's rate pause, July saw another rate hike, and signs seem to point to yet another in September.

While this is hardly welcome news to consumers dealing with high prices on everything from groceries to gas, there is one group it can benefit: savers.

See today's top savings rates here to find out much more you could be earning.

What another Fed rate hike could mean for your savings

While experts are divided over whether we'll see another rate hike in September, the majority of those we spoke with think a hike is likely.

"I believe the Fed will raise rates again in September and will continue to do so until there is more realized pain in the economy and the markets," says Jim Crider, CFP, founder of Intentional Living FP. "With the U.S. stock markets in the black for the year, job numbers being adequate and inflation still not completely settled back to the Fed's arbitrary 2% targeted rate, the Fed will stick with attempting to bring equilibrium through tightening until they find it absolutely necessary to reverse course."

George Kao, CFP, founder of Reach One Teach One Financial, agrees. "One of the primary reasons feds raise rates is to counteract inflation. Given that the latest inflation numbers according to the CPI-U (Consumer Price Index Urban) is 3.2% (down from 9.1% from June 2022), one may believe the Fed is likely to slow the rate hike for the Sep meeting. If you peel back the layers, however, the picture gets a bit more fuzzy."

Kao continues, "Within the CPI-U, inflation related to food, energy and new and used cars sales are down. Inflation related to housing (sales and rent) remains high. And when you look at general consumer sentiments (anecdotal), families are still struggling with the overall rising cost of everything. Do I believe the Fed will raise rates in September? They can certainly make a case to halt and wait in September, but I would not be surprised if they raised the rate one more time before year-end."

Savings account rates are set based on the federal funds rate. So, if the Fed raises rates in September, the interest earnings on your savings will rise too.

Check out current rates on savings accounts online now.

What you should do now

With the possibility of another rate hike on the horizon, what action should savers take today? One step is to open a high-yield savings account.

"High-yield savings accounts are typically paying much higher rates than most standard bank savings accounts," says Mike Hunsberger, ChFC, CFP, CCFC, owner of Next Mission Financial Planning. "There are currently numerous high-yield savings accounts paying more than 4% in interest. Many bank savings accounts are paying less than 1% in interest. Regular savings accounts aren't even keeping up with inflation that is still over 4% year over year."

Since savings account rates are variable, if the Fed increases rates in September, you'll be poised to benefit from it. But even if they don't, you'll still earn considerably more interest than you would with a regular savings account. If your money isn't in a high-yield account, you're essentially losing out on free money, wherever overall rates are.

Compare savings account options now to find out how much you could be earning.

The bottom line

Whether or not the Fed raises interest rates in September, a high-yield savings account is worth opening at any time. In addition to earning you considerably more, these accounts offer a safe, convenient place to stash your cash until you need it. It's one easy way to grow your savings faster and achieve your goals sooner.

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