Online Savings Rates Now at 1.40% APY – Savings Rates to Move Even Higher

Online savings rates, money market rates, and certificate of deposit rates from online banks continue to move higher in 2017. A few months ago we reported that the highest savings rate was at 1.30 percent. Now the top rate is 10 basis points higher, at 1.40 percent.

10 basis points might not sound like much of an increase over the summer, but rates have moved even higher since the beginning of the year. Back in January 2017, the best savings rate was at 1.15 percent, 25 basis points lower than the best rate now.

What does the future hold for online savings rates?

Even with the increase in rates in 2017, it's no secret that deposit rates are still low historically speaking and probably should be higher. The good news is online savings rates are expected to continue to move higher. A lot depends upon the Federal Reserve increasing the fed funds rate in the coming years.

The Fed's own projections are for a higher fed funds rate over the next three years. The Fed is expected to increase the rate once more in 2017. As a result, the rate will be in a targeted range of 1.25 percent to 1.50 percent. If this increase happens, we expect online savings rates to move above 1.50 percent, possibly as high as 1.65 percent.

Online Savings Rates 2018

Looking forward to 2018, the Fed has projected a fed funds rate between 1.90 percent and 2.60 percent. As a result, online savings rates would increase to a range of 2.00 percent to 2.75 percent, depending on where the fed funds rate actually ends up.

Online Savings Rates 2019

The fed funds rate is forecasted to be in a range of 2.60 percent to 3.10 percent and online savings rates will be in a range of 2.75 percent to 3.25 percent.

These forecasts are based on the Fed's June projections for the fed funds rate and will change. The next time the fed is expected to release new projection materials will be in March 2018. In conclusion, savings rates are moving higher due to a higher fed funds rate in the coming years.