The Federal Reserve declined to adjust the federal funds rate in May, leaving the benchmark range at 4.25%-4.50%, where it’s been since December 2024.
The CME Group, which tracks the likelihood of a target rate adjustment, is pessimistic about a rate cut after the next gathering on June 18. It gave an 82.7% probability that the benchmark interest rate will stay where it is. It’s more hopeful about the results of the meeting on July 29 and 30, placing nearly 50% odds on a cut to 4.00% to 4.25%.
In March, when the annual inflation rate was 2.4%, the Fed anticipated two rate cuts in 2025, down from the four envisioned in September. The central bank has yet to make any further predictions, instead taking a wait-and-see approach to the impact President Trump’s tariff policies have on the economy.
While the Federal Reserve doesn’t directly control interest rates, adjustments to the fed funds rate have a wide-reaching impact on loans, credit cards, mortgages, savings accounts and more.
Here are some smart financial steps to take before interest rates are slashed again.
1. Open a high-yield savings account
When the Fed lowers the federal funds rate, the annual percentage yield on savings accounts typically declines. Even so, a high-yield savings account (HYSA) should still provide a stronger return than a traditional savings vehicle.
“Earning money on your money is critically important,” said Elliot Eisenberg, chief economist at financial consulting firm GraphsandLaughs. “Some banks are offering better rates than others, so chase down the good ones.”
While the days of 5% and 6% yields are behind us for now, even a 4.15% HYSA is more than 10 times the average 0.41% return that traditional savings accounts offer.
LendingClub’s LevelUp Savings has a generous APY when you make monthly deposits of at least $250 (without deposits, you’ll receive a rate of 1% lower). Plus, there are no monthly fees or minimum balance requirements.
LendingClub LevelUp Savings Account
LendingClub Bank, N.A., Member FDIC
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Annual Percentage Yield (APY)
4.40% (with monthly deposits of at least $250), or 3.40%
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Minimum balance
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Monthly fee
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Maximum transactions
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Excessive transactions fee
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Overdraft fees
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Offer checking account?
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Offer ATM card?
If you’re looking for an option that doesn’t require as much up front, Western Alliance Bank’s HYSA also offers a strong APY and only requires a $1 opening deposit.
Western Alliance Bank High-Yield Savings Account
Western Alliance Bank is a Member FDIC.
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Annual Percentage Yield (APY)
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Minimum balance
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Monthly fee
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Maximum transactions
Up to 6 transactions each month
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Excessive transactions fee
The bank may charge fees for non-sufficient funds
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Overdraft fee
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Offer checking account?
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Offer ATM card?
2. Lock in CD rates
Certificates of deposit (CDs) follow the movement of the Fed, so their return will decline when the federal funds rate starts to come down. But they have fixed rates, so if you take one out now you’ll be protected from yield declines later in 2025.
While CD rates have already started to drop, they remain a solid investment if you change your timeline.
“Take a lower yield or maybe go out a little bit longer with the CD,” said Eisenberg.
3. Adjust your approach to bonds
With more cuts anticipated, Eisenberg said investors will want to switch up their strategy when it comes to bonds.
“More risk or higher duration, those are the only choices that investors really have,” he said. “It’s more risk in the credit rating or more risk in the length of time.”
If you’re younger, you’ll have more time to recoup losses and can afford to take more risks. Older investors closer to retirement should be more conservative.
You can trade bonds using a platform like E*Trade, which also has a library of educational resources for those looking for some additional information.
E*TRADE
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Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No minimum to open an E*TRADE brokerage account; minimum $500 deposit to invest in robo-advisor platform Core Portfolios
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Fees
Fees may vary depending on the investment vehicle selected. Zero commission fees for stock, ETF and options trades; zero transaction fees for over 4,400 mutual funds; robo-advisor Core Portfolios charges 0.30% annual advisory fee
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Investment vehicles
Robo-advisor: E*TRADE Core Portfolios IRA: E*TRADE Traditional, Roth, Rollover, Beneficiary, SEP and SIMPLE IRAs, IRA for Minors and E*TRADE Complete™ IRA Brokerage and trading: E*TRADE Trading Other: E*TRADE Coverdell ESA (Education Savings Account), Custodial Account for minors and small business retirement plans
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Investment options
Stocks, bonds, mutual funds, CDs, ETFs, options and futures
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Educational resources
Educational library includes in-depth articles and videos for any type of investor
Pros
- No commission fees for stock, ETF and options trades
- No transaction fees for over 4,400 mutual funds
- Automated investing through Core Portfolios platform (minimum required)
- E*TRADE Coverdell ESA helps you save for college early on
- Active traders receive volume discounts on options
- Free analyst research and investing tools
- Strong mobile platform
Cons
- Robo-advisor Core Portfolios requires minimum $500 to enroll and charges 0.30% annual advisory fee
- Website may be cumbersome to wade through
- No forex trading
4. Start saving for big-ticket items again
If you’re planning a major purchase, like a house or car, now is the time to start squirrelling away money for a down payment.
Interest rates on car loans generally drop following a rate cut, sometimes even in anticipation of one. And while the Fed doesn’t directly impact home loan rates, its decisions influence what mortgage lenders charge.
“The supply of homes has gotten better,” Eisenberg noted. “Inventory is the best it’s been in four or five years.” If rates end up falling, you could also consider refinancing.
Rocket Mortgage offers fixed-rate terms of anywhere from 8 to 30 years and is one of the highest ranked for customer satisfaction on J.D. Power’s 2024 mortgage origination survey.
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Interest rates FAQs
How low will interest rates go in 2025?
It’s difficult to predict how interest rates will change in 2025. After the March Federal Open Market Committee meeting, members projected two cuts to the federal funds rate by the end of 2025. Since then, however, the Fed has backed off making any more predictions.
What will rate cuts mean for homebuyers in 2025?
When the federal funds rate is cut, mortgage rates typically follow suit. Lowering the cost of borrowing creates more opportunities for prospective homeowners.
Who benefits from higher interest rates?
Bond buyers and those with CDs, money market accounts and other savings vehicles often benefit from periods of higher interest rates.
When will interest rates go down?
The Federal Open Market Committee meets eight times a year to discuss potential changes to the Federal funds rate. It has already met three times in 2025, with the next meeting scheduled for June 17 and 18.
When did the Federal Reserve last lower rates?
The last time the Federal Reserve adjusted the federal funds rate, which heavily influences interest rates, was in December 2024, when it cut it to a range of 4.25% to 4.50% .
Meet our experts
At CNBC Select, we work with experts who have specialized knowledge and authority based on relevant training and/or experience. For this story, we interviewed Dr. Elliot Eisenberg, chief economist for GraphsandLaughs.
Why trust CNBC Select?
At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every personal finance article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of financial products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
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