When the Federal Reserve raises its policy rate, savings and CD rates often rise too—but not automatically, immediately, or by the same amount. Banks set deposit rates according to their funding needs and competition. Savings rates are commonly variable; a fixed-rate CD you already opened generally keeps its agreed rate until maturity, while rates on new CDs can change.
Why a Fed rate increase does not produce an equal deposit-rate increase
The federal funds rate is a target for overnight lending among depository institutions. It is not a rate the Fed assigns to consumer savings accounts or CDs. Banks decide what to pay depositors, so a policy-rate increase creates upward pressure without requiring a matching change to account rates.
Retail deposit rates have historically been “sticky”: they tend to rise less than wholesale market rates, particularly early in a tightening cycle. Market rates on term products may move in anticipation of expected Fed decisions, while the rates banks offer retail customers adjust more gradually. The Federal Reserve described this pattern in its June 2017 analysis.
What historical rate changes show—and what they do not
In the 2015–2017 tightening cycle, the Fed’s analysis found that after the first three policy hikes—a cumulative 75 basis points—the average six-month CD rate in its RateWatch sample had risen 6 basis points, while the average checking-account rate had risen 1 basis point. These are historical product averages for the period studied, not current offers or a forecast for any individual account.
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Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →Outbyte Driver Updater FREEScan for outdated or missing drivers - takes under a minuteDriver Scan →In a different measure and period, the Fed reported that from 2021:Q4 through 2023:Q3, domestic deposit funding costs rose 1.9 percentage points while the federal funds effective rate rose 5.25 percentage points. Those figures describe bank funding costs in aggregate, not the APY on a household’s particular account. The Fed also found that deposit-rate pass-through was more muted in aggregate than in its comparison period and that deposit betas varied more across banks. A deposit beta is the change in a deposit rate divided by the change in the effective federal funds rate. See the Fed’s April 2024 analysis.
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How savings accounts and CDs can respond differently
Savings accounts
Savings accounts are non-maturity deposits: they do not have a set term after which the bank must return the balance. Rates are commonly variable, but the bank’s offer and account agreement determine how and when the rate can change. An institution may raise its savings rate, leave it unchanged, or offer a higher rate only on certain balances or under particular conditions.
The Fed’s regulatory definition of savings deposits includes familiar passbook and statement savings accounts as well as money market deposit accounts. Its savings-deposit FAQ explains that the April 2020 Regulation D change removed the six-per-month convenient-transfer limit from the definition; that regulatory change is not a rule requiring banks to adjust interest rates.
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Certificates of deposit
A CD has a specified term and rate arrangement. A bank can change the rate it offers on new CDs as market conditions and its funding needs change. A CD already opened at a fixed rate generally retains its contractual rate until maturity; check the individual agreement, since terms depend on the specific product. The Fed’s 2017 historical sample found that longer-maturity retail deposits moved more than checking and savings deposits, though the increases it observed were modest.
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Why one bank may raise rates more than another
Deposit pricing depends on more than the Fed’s latest move. Banks weigh their need for deposits and the competitive pressure to retain or attract customers. A saver who can move money to a better offer may push banks to compete, but that pressure does not guarantee a rate increase at every institution.
The Fed’s 2024 comparison found more variation in deposit betas across banks during the recent cycle than in the 2004 cycle, with lower betas among larger banks in its sample. That is a finding about the banks and periods analyzed, not a rule that predicts what a particular institution will do. The Fed’s Commercial Bank Examination Manual also recognizes online deposits and CD listing services as rate-sensitive channels banks monitor.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How to compare an account or CD after a rate increase
Compare the actual offer and terms rather than assuming an account has tracked the Fed’s change.
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- Check the APY and conditions. Compare offers for the same balance and date, and note whether a promotional rate or balance requirement applies.
- Confirm how the rate works. Determine whether a savings rate is variable and whether a CD rate is fixed for its term.
- Match the CD term to your needs. Check the maturity date and early-withdrawal terms against when you may need the money.
- Review eligibility and costs. Look for minimum balances, fees, and any conditions required to earn the advertised rate.
- Verify the institution and coverage. Check the institution and applicable deposit-insurance coverage before moving funds.
Current rates and account terms change frequently; the historical Fed analyses cited here do not establish today’s offers.
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