Key Insights

The Federal Reserve is scheduled to announce its interest rate decision next Wednesday, with indications suggesting that it will maintain current rates for the time being. However, the markets are forecasting possible rate reductions in 2025, anticipating cuts of at least one percentage point by the year’s end.

Current Rate Landscape

In 2023, the Federal Reserve has postponed any changes to the federal funds rate in consecutive meetings following a series of cuts at the end of 2024. The previous rate adjustments resulted in a decrease of one percentage point after years of stability at a historic high.

According to the CME Group’s FedWatch Tool, there is a strong consensus that the Fed will decide to keep the rate unchanged in the upcoming meeting. Following this, there are five more scheduled meetings in 2025.

Projected Future Cuts

The market predicts a roughly 75% likelihood that the Federal Reserve will initiate cuts totaling at least one percentage point by December of 2025. This could manifest as multiple smaller cuts, typically around 0.25 percentage points each, or potentially a single more significant reduction.

Investors are particularly keen on the June 18 meeting, where they anticipate the possibility of the first rate cut, coupled with expectations for another reduction after the July meeting.

Impact on Savings and CD Rates

Given the expectation for no immediate changes from the Federal Reserve, significant shifts in savings account rates are unlikely in the short term. Financial institutions often keep their rates stable until concrete changes occur within the Fed’s policy.

Conversely, the behavior of Certificate of Deposit (CD) rates tends to differ. Since CDs offer fixed rates for a set duration, banks often adjust these rates in anticipation of forthcoming Fed actions. If the Fed signals an impending cut during its announcements, some banks may begin to lower their CD rates ahead of time.

Future Rate Expectations and Uncertainties

The response of CD rates will largely depend on the Fed’s messaging during and after the meeting. If hints suggest prolonged stability in rates, it could allow for CD rates to maintain their current levels. However, any signs indicating future cuts might prompt early adjustments downwards.

The economic outlook remains particularly fluid due to uncertainties surrounding external factors, such as tariff policies that could influence inflation and economic growth. These dynamics add layers of complexity to rate forecasts from the Federal Reserve.

Monitoring Rate Changes

As financial institutions consistently update their offers, it’s vital for consumers to remain informed on the latest rates. Investopedia tracks daily data from over 200 banks and credit unions to provide accurate rankings of the prevailing savings and CD rates available.