(CNN) — For its fourth meeting in a row, the Federal Reserve opted to leave unchanged its key short-term interest rate — which influences a host of rates on consumer financial products and bank accounts across the United States.
That means that once again anyone with savings that they want to invest in stable, low-risk, interest-yielding assets is in luck. It may be especially good news for retirees, who are usually advised to keep a year’s worth of living expenses in interest-bearing accounts so that they won’t have to sell stocks from their portfolio when the market is down.
Still, many investors may be eager for rate cuts — and the Fed is still forecasting that two might happen this year. But given the volatile environment amid chaotic tariff policy, Middle East tensions and other stressors, any cuts in the next several months could signal the Fed is worried about a downturn in the economy, rather than lowering rates because inflation has fallen to the Fed’s desired target.
“We want interest rates to come down because inflation pressures are receding… not because the economy is rolling over and in need of Fed stimulus,” said Greg McBride, chief financial analyst at Bankrate.
For your cash savings
The annual inflation rate in May rose slightly to 2.4%.
To get steady, low-risk returns that can easily top that, you have a number of options.
High-yield bank accounts: If you have cash for emergencies and cash for upcoming but-not-tomorrow expenses — eg, a trip at Christmas or tuition payments for 2026 — stash that money in a high-yield savings or money market account at an FDIC-insured online bank.
Rates on some of the best accounts now available range between 3.6% and 4.3%, according to Bankrate. That compares very favorably to the average savings rate across all banks, which was just 0.38% as of June 16, according to the FDIC.
Money market funds: If you don’t want to shop around for good rates, and you’re looking for another option in which to stash your emergency fund or money for upcoming expenses, a low-cost money market mutual fund can do the leg work for you.
The funds, which typically invest in short-term, low-risk Treasuries as well as municipal and corporate bonds, are not FDIC-insured. But they are considered very low risk because they almost always preserve your principal since they only rarely have fallen below $1 a share.
As of June 17, the average money market fund yielded 4.10 percent, according to Crane Data.
Certificates of deposit: If you can afford to lock your money up for a fixed period of time (eg, 6 months, 18 months, 1 year, 3 years, etc.) FDIC-insured banks will offer you a higher return in a CD.
Rather than buy one directly from your bank, though, you will have more choice and are likely to get a much better rate if you buy a “brokered CD” through your brokerage.
At Schwab.com, for instance, CD rates were averaging between 4.35% and 4.5% on Wednesday morning on durations between three months and five years.
Note that you will owe federal, state and local taxes on your interest earnings.
And you may be subject to a penalty if you take the money out before your CD’s term ends.
US Treasuries: You can get a decent return and a tax break if you invest in US Treasury bills and notes.
Again, buying them through a brokerage where you already have an account may be more efficient than trying to buy them on your own from TreasuryDirect.gov.
As of Wednesday morning, average yields on Treasuries ranging in maturities from 3 months to 10 years were offering rates between 3.9% and 4.36%.
Income you make from your Treasuries will be taxed at the federal level but are generally exempt from state and local income taxes.
AAA-rated municipal bonds: Muni bonds are another tax-advantaged investment option for your cash. The interest you make on munis is exempt from federal income tax — and in some cases, state and local taxes too, if you buy a muni issued by your home state or city.
But you’ll want to stick with top-rated munis (e.g., AAA) if your primary goal is to have an income-producing safe asset in your portfolio.
“These securities generally offer strong credit fundamentals, allowing investors to maintain portfolios with robust credit strength,” said Tom Kozlik, head of public policy and municipal strategy at Hilltop Securities.
The highest rated munis with maturities ranging from three months to 10 years offered interest yields between 2.36% and 4.51% on Wednesday morning at Schwab.com.
Treasury inflation-protected securities: If you’re very worried about inflation reducing the purchasing power of your savings over time you might consider putting some of the bond portion of your overall portfolio into Treasury inflation-protected securities (aka TIPS), said Rob Williams, managing director of financial planning at Schwab.
They’re issued for terms of five, 10 and 30 years.
The value of the principal on a TIPS is tied to the Consumer Price Index, so if it rises during the time you’re holding the security, you will get back more than you paid when the bond matures. If it’s lower than the original amount you will get back your original amount, according to TreasuryDirect.gov.
Here is a hypothetical example from Schwab: If you pay $1,000 for a new, five-year TIPS and inflation is 3% in the first year, the principal will grow to $1,030. If inflation is also 3% in the next year, the principal will grow by another $31 (i.e., 3% of $1,030) to total $1,061 and so on.
In the interim, the periodic interest payments you’ll get while you hold the TIPS will be equal to the coupon rate multiplied by the value of the inflation-adjusted principal. So if a TIPS has a 2% coupon rate and the principal grows to $1,030 in the first year, you will be paid a total of $20.60 for that year.
Your debts: Still pricey
Even a few small rate cuts from the Fed – whenever they come – won’t meaningfully reduce your debt load in many instances.
“Borrowing rates are high, with mortgage rates near 7 percent, many home equity lines of credit in double-digit interest rate territory, and the average credit card rate still above 20 percent,” McBride said.
Credit cards: The average credit card rate as of June 11 was 20.12%.
Your best bet to minimize your interest payments regardless of what the Fed does is to try to get a 0% balance transfer card that will give you up to 21 months to pay off your balance interest free.
Home loans: Mortgage rates move with the 10-year Treasury yield, which is driven by economic factors such as inflation and growth, and expectations of the Fed’s future moves.
For the week ending June 18, the average rate on a 30-year fixed-rate mortgage was 6.81%, according to Freddie Mac. That’s below the 7.04% registered in mid-January but above the 6.69% 52-week average.
As for home equity lines of credit (HELOCs) and loans (HELs), the average HELOC rate was 8.22% as of June 11, whereas the average rates on five, 10- and 15-year HELS were between 8.25% and 8.4%, according to Bankrate.
With rates showing no signs of dropping significantly and the threat of tariffs already increasing raw material costs to build new homes, if you’re in the market for a home you can do several things to reduce the financial hit of buying one, according to Bankrate. Among them: Make sure to have the best credit score possible to qualify for a lower loan rate. And shop around for the most advantageous mortgage.
Car loans: Rates on car loans haven’t moved much over the past year, according to data from Edmunds.com.
The average APR for a new car loan was 7.3% in May, the same as it was a year earlier. On used car loans, the rate fell slightly to 11% from 11.5%.
But loan amounts grew by roughly $1,800 in that time period, to $42,884 on new car loans and $29,114 on used car loans.
To get the best deal going forward “shop around for a loan with the same rigor as (your) car search,” said Joseph Yoon, Edmunds’ consumer insights analyst.
Ultimately, though, with both prices and interest rates elevated, “the best bet for reducing the loan burden is to borrow the least amount possible,” Yoon noted.
Given the threat of tariff-based pricing and lower-than-usual inventories of used cars, trading your car in could offer you a big benefit when negotiating the price of your next car, he added.
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