The fourth Fed meeting of 2018 has started today. The FOMC statement should be released on 2:00pm Wednesday. A rate hike is expected which will move the target federal funds rate range to 1.75% - 2.00%. A Fed rate hike on Wednesday would be the second rate hike this year and the seventh rate hike since the Fed began normalizing rates in December 2015. After Wednesday, at least one more Fed rate hike (and possibly two more) is likely for 2018. How will this affect deposit rates? To help answer that question, we did an analysis of our proprietary banking data with a focus on savings account rates.
Interest rate data collected from savings accounts from 6,905 banks and credit unions show that savings account rates have reached a 5-year high. This is shown in the following graph.
The above graph shows the rate trends of the average savings account yields. This is an interactive graph. You can choose the look-back period (from 3 months to 5 years).
As you can see in the graph, the average savings account yield has finally reached a five-year high. The average is dominated by brick-and-mortar banks and credit unions. Thus, the average is still low compared to internet savings account rates. Below are three things to note from this graph:
- The average savings account yield for June 2018 is 0.216%. This exceeds the average from June 2013 of 0.203%.
- In the last five years, the average savings account yield reached its low of 0.177% in December 2016, around the time of the second Fed rate hike.
- Since December 2016, the average savings account yield has increased by 22%. During this time, there have been four additional Fed rate hikes.
Internet savings account yields have increased much faster than brick-and-mortar savings account yields. Since December 2016, the average internet savings account yield has increased from 0.722% to 1.179%, an increase of 63%.
In December 2016, the top yield for a nationally-available savings account was 1.30% APY (promotional rate from Palladian PrivateBank which is now CIBC Bank USA.) As of June 12, 2018, the top yield is 2.26% APY, an increase of 74% (The 2.26% APY is a brand new promotion from Northern Bank Direct.)