The Federal Reserve lowered the federal funds rate three times in 2025, shaving off three-quarters of a point to bring down to a range of 3.5% to 3.75%.
While the Fed doesn't directly control interest rates, adjustments to its benchmark rate have a significant impact on the cost of borrowing — and on the benefit of saving.
The Federal Open Market Committee has recessed for the year, but eight new meetings are scheduled for 2026, starting on Jan. 27 and 28.
Fortunately, there are ways to protect your money before the first rate cut of 2026.
1. Open a high-yield savings account
When the Fed lowers the federal funds rate, the annual percentage yield on savings accounts typically declines. Even so, a high-yield savings account (HYSA) should still provide a stronger return than a traditional savings vehicle.
"Earning money on your money is critically important," said Elliot Eisenberg, chief economist at financial consulting firm GraphsandLaughs. "Some banks are offering better rates than others, so chase down the good ones."
While the days of 5% and 6% yields are behind us for now, even a 4.15% HYSA is more than 10 times what a traditional savings account offers.
Happen Bank's LevelUp Savings offers a generous APY when you make monthly deposits of at least $250 or more, (without deposits, you'll receive a 1% lower rate.) Plus, there are no monthly fees or minimum balance requirements.
Happen Bank LevelUp Savings
Annual Percentage Yield (APY)
4.20% (with monthly deposits of $250 or more), or 3.00%
Minimum balance
None
Monthly fee
None
Maximum transactions
None
Excessive transactions fee
None
Overdraft fees
N/A
Offer checking account?
Yes
Offer ATM card?
Yes
Terms apply.
If you don't want to put in as much up front, Western Alliance Bank's HYSA only requires a $1 opening deposit.
Western Alliance Bank High-Yield Savings Account
Annual Percentage Yield (APY)
3.80% APY
Minimum balance
$1 minimum deposit
Monthly fee
None
Maximum transactions
Up to 6 transactions each month
Excessive transactions fee
The bank may charge fees for non-sufficient funds
Overdraft fee
No overdraft fee
Offer checking account?
No
Offer ATM card?
No
Terms apply.
2. Lock in CD rates
Certificates of deposit (CDs) follow the movement of the Fed, so their returns drop when the federal funds rate comes down. But they have fixed rates, so if you take one out now, you'll be protected from more yield declines in 2026.
While CD rates have already dropped, they remain a solid investment if you change your timeline.
"Take a lower yield or maybe go out a little bit longer with the CD," said Eisenberg.
3. Take another look at bonds
With more cuts anticipated, Eisenberg said investors will want to switch up their strategy when it comes to bonds.
"More risk or higher duration, those are the only choices that investors really have," he said. "It's more risk in the credit rating or more risk in the length of time."
If you're younger, you can afford to take more risks because you have more time to recoup any losses. Older investors who are closer to retirement should be more conservative.
You can trade bonds on E*Trade, which has no account minimum to open a brokerage account and also offers zero-commission stocks, ETFs and thousands of no-load mutual funds.
E*TRADE
Minimum deposit and balance
Varies depending on the investment vehicle selected. No minimum to open an E*TRADE brokerage account; minimum $500 deposit to invest in robo-advisor platform Core Portfolios.
Fees
Vary depending on the investment vehicle selected. Zero commission fees for stock, ETF and options trades; zero transaction fees for over 4,400 mutual funds; robo-advisor Core Portfolios charges a 0.30% annual advisory fee.
Investment options
Stocks, bonds, mutual funds, CDs, ETFs, options and futures
Investment vehicles
Robo-advisor: E*TRADE Core Portfolios IRA: E*TRADE Traditional, Roth, Rollover, Beneficiary, SEP and SIMPLE IRAs, IRA for Minors and E*TRADE Complete™ IRA Brokerage and trading: E*TRADE Trading Other: E*TRADE Coverdell ESA (Education Savings Account), Custodial Account for minors and small business retirement plans
Educational resources
In-depth articles and videos, access to Morgan Stanley research and institutional-grade market insights.
Terms apply.
Pros
- No commission fees for stock, ETF and options trades
- No transaction fees for over 4,400 mutual funds
- Core Portfolios offers automated investing with a choice of standard, socially responsible (ESG), smart beta and tax-sensitive portfolio strategies
- Tax-loss harvesting available through Core Portfolios at no additional cost
- Active traders receive volume discounts on options
- Free analyst research and investing tools
Cons
- Core Portfolios requires $500 minimum to enroll and charges 0.30% annual advisory fee
- No access to certified financial planners through Core Portfolios
- No forex trading
4. Start car shopping again
If you've been sitting on a major purchase, like a house or car, now might be the time to start your preliminary search. Interest rates on car loans drop following a rate cut, sometimes even in anticipation of one.
And while the Fed doesn't directly impact mortgage rates, its decisions influence what mortgage lenders charge.
"The supply of homes has gotten better," Eisenberg noted. "Inventory is the best it's been in four or five years." If rates fall again, you could also consider refinancing.
Rocket Mortgage offers fixed-rate terms of 8 to 30 years and is one of the highest-ranked lenders for customer satisfaction on J.D. Power's 2025 mortgage origination survey.
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Interest rates FAQs
What will rate cuts mean for homebuyers in 2026?
Mortgage rates are more closely aligned with fluctuations in the 10-year Treasury yield but they are affected by cuts to the fed funds rate. Lowering the cost of borrowing creates more opportunities for prospective homeowners.
What financial products benefit from higher interest rates?
CDs, money market accounts, HYSAs and other savings vehicles often offer better returns during periods of higher interest rates.
When will interest rates go down again?
The Federal Open Market Committee meets eight times a year to discuss potential changes to the Federal funds rate. The first meeting of 2026 is scheduled for Jan. 27 and 28.
Meet our experts
At CNBC Select, we work with experts who have specialized knowledge and authority based on relevant training and/or experience. For this story, we interviewed Dr. Elliot Eisenberg, chief economist for GraphsandLaughs.
Why trust CNBC Select?
At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed financial decisions. Every personal finance article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of financial products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
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