Interest rates are set by the Federal Reserve, not by banks or market demand alone

The Federal Reserve—a government agency that oversees the nation's banking system—decides the baseline interest rate that banks use to lend to each other. That rate, called the federal funds rate, is the anchor that everything else hangs from. When the Fed raises or lowers this rate, banks eventually raise or lower the rates they offer to you on savings accounts, money market accounts, and certificates of deposit (CDs). The opposite is also true: when the Fed signals it might cut rates, banks often start lowering what they pay before the cut actually happens.

Whether rates are going down depends on what the Fed is doing right now, and the Fed's decisions change based on inflation, employment, and economic growth. There is no single answer that stays true for months at a time. The best way to know what is actually happening is to check the Federal Reserve's own website or financial news sources that report on Fed decisions the day they happen, rather than relying on a guide written weeks or months ago.

Key Takeaways

  • The Federal Reserve sets the baseline rate that banks use, and banks pass changes down to the rates they offer you on savings and CDs.
  • Interest rates move based on inflation, jobs, and economic conditions—not on a fixed schedule—so what is happening now may not be what happens next month.
  • You can check the Fed's current rate decision on the Federal Reserve's official website or major financial news outlets on the day of an announcement.
  • Even if rates are falling overall, individual banks may raise or lower their own rates at different times and by different amounts.
  • Locking in a CD rate now protects you if rates fall further, but waiting protects you if rates rise instead.

How the Federal Reserve's decisions reach your bank account

When the Federal Reserve raises its rate, banks pay less to borrow from each other, so they have less reason to pay you high interest on your savings. When the Fed lowers its rate, banks pay more to borrow from each other, so they compete harder for your deposits by offering higher rates. The lag between a Fed decision and a change in your account is usually one to three weeks, though some banks move faster and some move slower.

Not every bank moves at the same time or by the same amount. A large national bank might lower savings rates within days of a Fed cut, while a smaller regional bank or online bank might wait weeks. Some banks cut savings rates immediately but keep CD rates high to attract longer-term money. This is why two banks offering the same type of account can have very different rates on the same day.

Why the Fed raises and lowers rates in the first place

The Fed raises rates when inflation is too high—meaning the money in your pocket buys less than it did before. Higher rates make borrowing more expensive, which slows down spending and inflation. The Fed lowers rates when the economy is weak or unemployment is high, because cheaper borrowing encourages people and businesses to spend and hire.

These two goals often pull in opposite directions. If inflation is high but jobs are scarce, the Fed has to choose which problem to tackle first. That choice—and the economic data that informs it—changes month to month. This is why interest rates do not follow a predictable pattern and why financial experts often disagree about what the Fed will do next.

What to do if you are waiting for rates to move

If you have money sitting in a checking account earning little or no interest, waiting for rates to fall is usually a mistake. Even if rates do fall, the difference between what you earn now and what you would have earned waiting is often larger than the difference between rates today and rates a few months from now. A CD or high-yield savings account earning 4% today is better than a checking account earning 0% while you wait to see if rates hit 5%.

If you are deciding between a CD and a savings account, the choice depends on whether you might need the money. CDs lock your money away for a set time—usually three months to five years—and charge a penalty if you withdraw early. Savings accounts let you move money out anytime. If rates are falling, a CD locks in today's rate. If rates are rising, a savings account lets you move to a higher rate without penalty. Neither choice is wrong; it depends on your situation and how confident you are about what rates will do.

How to find out what rates are doing right now

The Federal Reserve announces rate decisions eight times a year on a published schedule. You can find the schedule and the actual decision on the Federal Reserve's official website (federalreserve.gov). Major financial news outlets like Reuters, Bloomberg, and the Wall Street Journal report on the decision within minutes of the announcement.

For the rates that banks are actually offering, check comparison sites like Bankrate, DepositAccounts, or NerdWallet, which update daily. These sites show you what different banks are paying on savings accounts and CDs right now, so you can see whether rates are moving up or down in real time. Keep in mind that rates on these sites change constantly, so a rate you see today may be different tomorrow.

The difference between what the Fed does and what your bank does

The Fed's rate is not the same as the rate your bank offers you. The Fed controls the rate banks charge each other for overnight loans. Your bank uses that as a starting point, then adds its own margin based on how much it costs to run the bank, how much competition it faces, and how much profit it wants to make. A bank in a competitive market with low costs might offer you a higher rate than a bank in a less competitive area with higher costs, even if the Fed's rate is the same for both.

This is why shopping around matters. Two banks might face the same Fed rate, but one might offer you 4.5% on a savings account while the other offers 2%. The difference is not about the Fed—it is about the bank's own business decisions. If you have money in a low-rate account, moving it to a higher-rate account at a different bank can earn you hundreds of dollars a year with no risk.

What happens to your existing accounts if rates change

If you have money in a savings account, the rate your bank pays you can change at any time, usually with a few days' notice. Banks lower savings rates when the Fed cuts, and they raise them when the Fed raises—but they do not always move by the same amount. Your bank might lower rates by 0.5% when the Fed cuts by 0.5%, or it might lower them by 0.75%. Read your account agreement or call your bank to understand how your rate works.

If you have money in a CD, your rate is locked in for the entire term. If you bought a one-year CD at 5% and rates fall to 3%, you still earn 5%. If rates rise to 6%, you still earn 5%. This is the trade-off of a CD: you give up the ability to move to a higher rate if rates rise, but you are protected if rates fall. When your CD matures, you can move the money to a new CD at whatever rate is available then, or move it to a savings account instead.

Frequently Asked Questions

How often does the Federal Reserve change interest rates?

The Fed meets eight times a year on a published schedule and announces a decision each time. It does not change rates at every meeting—sometimes it holds the rate steady. You can find the meeting schedule on federalreserve.gov.

If the Fed cuts rates, will my bank cut rates right away?

Most banks cut savings rates within one to three weeks of a Fed cut, but some move faster and some move slower. Banks that compete heavily for deposits sometimes cut more slowly to keep rates attractive. Check your bank's website or call to see if your rate has changed.

Should I move my money to a CD if rates are about to fall?

If you think rates will fall, locking in a CD now protects you. But if you are wrong and rates rise instead, you will be stuck earning a lower rate. The safest approach is to keep some money in a savings account (so you can move to higher rates) and some in a CD (so you are protected if rates fall).

Why do different banks offer different rates if the Fed's rate is the same for all of them?

The Fed's rate is just a starting point. Each bank decides its own rates based on its costs, competition, and profit goals. Banks in competitive markets or with low costs often offer higher rates than banks in less competitive areas.

Can I withdraw money from a CD early if interest rates change?

You can withdraw early, but most banks charge a penalty—usually a few months of interest. Check your CD agreement to see what the penalty is. If rates rise significantly, the penalty might be worth paying, but calculate it first.