Banking industry's response to the 2024 Federal Reserve interest rate reductions and implications for your savings in the present day

In the ever-changing economic landscape, understanding how banks' strategies shape rate moves can help you keep your savings rate ahead of inflation during uncertain times. Let's delve into the behaviour of various financial institutions in 2024, a year marked by multiple Federal Reserve rate cuts.

The Federal Reserve, in late 2024, cut interest rates multiple times, causing a ripple effect across the financial sector. While this may have seemed like a positive move for borrowers, savers faced a challenging situation as the annual percentage yields (APYs) on savings accounts were reduced.

Credit unions, such as Navy Federal Credit Union and PenFed, typically maintain higher yields and often lower rates more slowly than banks. For instance, PenFed offered a top APY of 3.00 percent on its Premier Online Savings Account in August 2024. Despite the Fed cutting rates three times between September and December 2024, PenFed's Premium Online Savings account rates remained unchanged until August 2025, when it offered 2.80 percent APY.

On the other hand, regional banks, like Regions Bank, tend to translate Fed rate cuts more swiftly into lower savings rates for customers. Regions, for example, lowered its rate from around 0.25 percent APY to around 0.10 percent APY following the rate cuts, and today its rates on LifeGreen savings account pay 0.01 percent APY for most savers.

Wells Fargo offers higher rates for Platinum Savings account holders with balances over $100,000, with an APY of 1.01 percent. However, balances between $500,000 and $999,999.99 earn 2.00 percent APY, and balances of $1,000,000 or more earn 2.50 percent APY.

JPMorgan Chase and Wells Fargo, two of the biggest U.S. banks, have flexibility to avoid sudden large cuts to savings rates due to their diversified revenue streams and large operational costs. Their APY for savings accounts remains at a mere 0.01 percent.

Online banks, such as Ally and CIT Bank, offer high savings rates due to lean cost structures, no physical branches, and technology-driven platforms. However, they are quick to adjust rates in response to Fed moves. Following the 2024 Fed rate cuts, banks like Ally reduced rates by almost a full percentage point, dropping from about 4.20 percent APY in August 2024 to approximately 3.50 percent APY today.

Western Alliance Bank, which offers an online-only savings account, dropped its rates a full percentage point in just six months, going from a 5.30 percent APY in August 2024 to 4.30 percent by February 2025.

As we move into 2025 with more Fed rate cuts expected, savvy savers should regularly compare yields and consider diversifying their savings across institution types. Locking in a fixed-rate with one of the best CD rates or buying short-dated U.S. government bonds (T-bills) before further cuts could protect returns.

In conclusion, the landscape of savings rates varies significantly across large national banks, regional banks, online banks, and credit unions. Online banks suit those chasing the top rates and willing to accept fluctuations. Credit unions appeal for steady yields and community values. National banks offer convenience and stability but lower potential returns. It's essential for savers to stay informed and adapt their strategies accordingly to maximise their returns in these uncertain times.