Interest rates are set by the Federal Reserve, not by market forces alone, and they move based on inflation and employment data
The Federal Reserve raises or lowers its benchmark interest rate — called the federal funds rate — roughly eight times a year at scheduled meetings. This rate influences what banks charge each other for overnight loans, which then ripples out to affect the rates you see on savings accounts, CDs, mortgages, and credit cards. The Fed does not set those consumer rates directly; banks do. But when the Fed moves, banks almost always follow within days or weeks.
Whether rates are going up or down depends on what the Fed sees in two main measures: inflation (how fast prices are rising) and the unemployment rate (how many people have jobs). If inflation is high, the Fed typically raises rates to cool spending and bring prices down. If unemployment is rising and the economy is slowing, the Fed typically cuts rates to make borrowing cheaper and encourage spending. The Fed's next decision date and any recent moves are published on the Federal Reserve's official website, federalreserve.gov.
Key Takeaways
- The Federal Reserve announces rate changes at scheduled meetings throughout the year, and you can find the exact dates and decisions on federalreserve.gov.
- When the Fed raises its benchmark rate, banks raise the rates they offer on savings accounts and CDs within days or weeks, but mortgage and credit card rates may move differently.
- The Fed raises rates when inflation is high and cuts rates when the economy is weak, so checking recent inflation and jobs reports tells you what direction the Fed is likely leaning.
- Your own rate on a savings account or CD depends on your bank's decision, not just the Fed's rate — some banks move faster than others, and some offer higher rates to attract deposits.
How to find out what the Fed just decided
The Federal Reserve publishes a statement after each meeting, usually in the afternoon. The statement says whether the Fed raised, lowered, or held steady the federal funds rate, and it explains the reasoning in plain language. You can read the most recent statement on federalreserve.gov under "Monetary Policy" — no login required.
The Fed also publishes a calendar of upcoming meeting dates months in advance, so you can know when the next decision is coming. If you want to be notified when a decision is announced, you can set up email alerts through the Federal Reserve's website, or you can check financial news sites like Reuters, Bloomberg, or CNBC on meeting days — they publish the Fed's decision within minutes.
Why your bank's rate might not move at the same time as the Fed's rate
The federal funds rate and the rates you earn on savings are connected but not identical. When the Fed raises its rate, banks have more incentive to offer higher rates on savings accounts and CDs because they can earn more on the money they lend out. But banks do not have to raise your rate immediately, and some banks raise rates faster than others.
A large bank with plenty of deposits may not raise its savings rate for weeks or months after a Fed increase, because it already has the money it needs. A smaller bank or an online bank competing for deposits may raise rates within days. This is why comparing rates across banks matters — the rate you see at your current bank may lag behind what other banks are offering after a Fed move.
What inflation and jobs data tell you about the next rate move
The Fed looks at inflation data (released monthly by the Bureau of Labor Statistics) and jobs data (released monthly by the Bureau of Labor Statistics as well). If inflation is above the Fed's target of around 2 percent, the Fed is more likely to raise rates at the next meeting. If unemployment is rising or inflation is falling, the Fed is more likely to cut rates.
You do not need to be an economist to follow this. The Consumer Price Index (CPI) is published on the Bureau of Labor Statistics website, bls.gov, usually in the middle of each month. The jobs report is published on the same site early in each month. If you see that inflation is high and stable, expect the Fed to keep rates elevated. If you see that inflation is falling and jobs are being lost, expect the Fed to cut rates soon.
How rate changes affect different savings products differently
A high-yield savings account at an online bank typically moves quickly when the Fed raises rates — sometimes within a week. These accounts have variable rates, meaning they can change at any time. A certificate of deposit (CD) locks in a fixed rate for a set term (three months, one year, five years, and so on), so once you open a CD, the rate does not change even if the Fed raises or lowers rates later.
This creates a timing question: if you think rates are about to fall, locking in a CD rate now protects you. If you think rates are about to rise, keeping money in a high-yield savings account lets you benefit from the higher rates when they come. The tradeoff is that CDs penalize you if you withdraw early (called an early withdrawal penalty), while savings accounts let you move money anytime.
Where to check current rates and compare them across banks
The rates you see advertised on bank websites are real, but they vary widely. A high-yield savings account at one online bank might pay 4.5 percent while another pays 3.8 percent — both are current rates, but one is better. Sites like Bankrate, DepositAccounts, and NerdWallet let you filter savings accounts and CDs by rate, term, and bank type, and they update daily.
When you compare, pay attention to the Annual Percentage Yield (APY), not just the interest rate. APY includes the effect of compounding (interest earned on interest), so it is the true number that matters. Also check whether the rate is promotional (temporary) or standard (ongoing). A promotional rate might be high for three months, then drop to a much lower standard rate.
What happens to rates when the Fed cuts instead of raises
When the Fed cuts its benchmark rate, banks lower the rates they offer on savings accounts and CDs. This happens because banks earn less on the money they lend out, so they offer less to depositors. A savings account paying 4.5 percent might drop to 3.8 percent within a week of a Fed cut. CDs you already own are not affected — the rate is locked in — but new CDs will pay less.
This is why timing matters. If you expect the Fed to cut rates soon, locking in a CD at today's higher rate protects you from the lower rates coming. If you expect rates to rise, keeping money in a savings account (which will benefit from the increase) makes more sense than locking into a CD at today's lower rate.
Frequently Asked Questions
How often does the Federal Reserve meet to decide on interest rates?
The Federal Reserve holds eight scheduled meetings per year, roughly every six weeks. The exact dates are published on federalreserve.gov at the start of each year. The Fed can also hold emergency meetings between scheduled dates if needed, though this is rare.
If the Fed raises rates, will my savings account rate go up automatically?
Not automatically, and not always at the same speed. Your bank decides when and by how much to raise your rate. Online banks and smaller banks often move within days; large banks may take weeks or months. Check your bank's website or call to ask when they plan to adjust rates after a Fed move.
Can I predict what the Fed will do at the next meeting?
You can make an educated guess by watching inflation and jobs data, but the Fed sometimes surprises the market. The Fed's own communications — statements from Fed officials and the minutes from past meetings — give clues about what they are thinking. Financial news outlets often publish "Fed watch" trackers showing what traders expect at the next meeting.
Should I move my money to a different bank if my current bank is not raising rates?
If your bank is paying significantly less than competitors after a Fed increase, moving to a higher-paying bank makes sense — especially if you have a large balance. Online banks and credit unions often offer higher rates than big national banks. Just check for early withdrawal penalties on any CDs before you move.
What is the difference between the federal funds rate and the prime rate?
The federal funds rate is what the Fed sets; the prime rate is what banks charge their most creditworthy customers for loans. The prime rate is usually about 3 percentage points higher than the federal funds rate, and it moves in the same direction. Credit card rates and home equity lines of credit are often tied to the prime rate.