The Federal Reserve cut the federal funds rate by a quarter point yesterday, the first cut of 2025 — and the first of what turned out to be three before the year ended, closing 2025 at a target range of 3.50% to 3.75%.
For savers, the direction of travel is now clear. Top high-yield savings accounts that paid above 5% at the 2023 peak have been drifting down and are converging on roughly 4%.
Why Savings Rates Follow the Fed Down Faster Than They Followed It Up
Savings APYs are variable. Banks can change them at any time, without notice, and they do.
The asymmetry is well documented and worth naming: when the Fed raises, banks pass through increases slowly and partially. When the Fed cuts, they pass through decreases quickly and fully. The 2022–2023 rate cycle demonstrated it in both directions — online banks that took eighteen months to reach 5% have needed far less time to come off it.
Large traditional banks barely participate in either direction. The national average savings rate has remained under 0.5% through the entire cycle, because the biggest deposit franchises simply do not need to compete on price.
The Number That Matters More Than the Fed’s
If your money is at a big-four bank earning 0.01%, the Fed’s decision is irrelevant to you. The difference between 0.01% and 4% is roughly $400 a year on a $10,000 balance — vastly more than any single quarter-point move.
That gap is the actual decision. Everything else is noise.
What To Do Now
1. Check what you are actually earning. Not what the account paid when you opened it. Log in and find the current APY. Rates on existing accounts are cut silently, and promotional rates expire.
2. Move the emergency fund, not the checking account. Keep four to six weeks of spending where you can reach it instantly. The rest belongs somewhere that pays.
3. Consider locking part of it. With rates falling, CDs start to make sense in a way they did not while rates were rising. A 12- or 18-month CD fixes today’s yield against further cuts. Ladder it — do not lock everything at one maturity.
4. Watch for the bait-and-switch structure. Some accounts advertise a headline APY that applies only to balances under a threshold, or only for an introductory period, or only if you hit direct-deposit requirements. Read which of those applies before you move money.
5. Confirm FDIC or NCUA coverage. Especially with fintech apps that are not themselves banks. The coverage runs through a partner bank, and it is worth knowing which one and what the pass-through arrangement is.
What Not To Do
Do not chase a 0.15% difference between two online banks. The switching cost — in time, in direct-deposit updates, in linked-account verification — exceeds the gain on any normal balance.
And do not move an emergency fund into anything that can lose value in order to recover the yield. The point of that money is that it is there on the worst day of your year. A savings account at 3.8% doing its job beats a bond fund at 5.5% doing something else.
Sources: Federal Reserve Board, FOMC statements; US News, “Savings Interest Rate Forecast”
See which accounts are still paying at the top of the market in our best online savings accounts comparison.