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Will high-yield savings account rates go higher in 2024?

It is unlikely you'll get better high-yield savings rates in 2024; in fact, the rates may go down. Getty Images

High-yield savings accounts are a safe, reliable way to stash your cash and earn a solid interest rate. These interest-bearing deposit accounts work the same way as traditional savings products: You deposit money into the bank and earn interest on the money held in the account — but at a higher interest rate. 

Interest rates for high-yield savings accounts are high right now,  as savers can find account options with rates of over 5%. With the calendar about to turn the page to 2024 — and plenty of people with New Year's resolutions to save more money — it's worth exploring whether or not rates will go up even further in the new year.

Start earning interest by opening a high-yield savings account now.

Will high-yield savings account rates go higher in 2024?

It is unlikely that high-yield savings rates will go higher in 2024; in fact, there is a decent chance they will creep down over the course of the year. If you want to take advantage of the current high rates, it makes sense to open a high-yield savings account and get some cash into it right away. 

Here are some reasons you may not want to expect more rate growth next year:

Inflation seems to be tempered

The biggest reason that rates are so high right now is that the Federal Reserve has repeatedly raised the federal funds rate. While this does not directly impact the rates offered by a bank to consumers, generally speaking, commercial interest rates move in the same direction as the federal funds rate.

The Fed has taken the step to raise the federal funds rate to fight inflation. When rates are high, people are more likely to save rather than spend, which means less money in circulation. In theory, this tamps down inflation. 

"As interest rates have gone up there's more benefits to saving and keeping cash around because you can earn a higher interest on it," says Kim Hall, a financial advisor at Clarity Wealth Development.

The Fed's plan has largely worked. While inflation is not quite to the goal of 2%, it has gotten much better. And, there is some expectation that there will be at least two rate cuts next year, which would likely bring down high-yield savings rates. That means now may be the optimal time to open an account to get a high interest rate.

Open a high-yield savings account today to start earning interest.

The potential changes to treasury yields

The other major government factor that impacts interest rates is treasury yields. This is essentially the interest rate the government pays for money it borrows. Banks use money from deposits to invest in treasuries. If treasury yields go down, therefore, the amount of interest banks can pay for deposits will go down as well. 

UBS, a multinational investment bank and financial services company, predicts that the 10-year treasury yield will fall to 3.5% by the end of 2024, compared to 4.31% currently. If this bears out, interest rates for high-yield savings accounts could decline.

The bottom line

If you want to take advantage of the favorable interest rates available for high-yield savings accounts, now is the time. For numerous reasons — like the predicted drop in treasury yields and the potential for the Federal Reserve to drop the federal funds rate at some point in 2024 — the interest rate you can get from a high-yield savings account is unlikely to get much higher next year. In fact, rates may go down a bit. Your best bet may be to deposit some money now and start earning interest. 

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