What the Federal Reserve Rate Cycle Actually Does to Your HYSA

HYSA rates follow the Fed funds rate, but they move faster in one direction than the other.

The Federal Reserve does not set savings account rates. What it sets is the federal funds target rate — the overnight borrowing rate between banks — and the rest of the deposit market follows, with varying speed and magnitude.

During the 2022–2023 tightening cycle, the Fed raised rates by 525 basis points. Ally Bank's high-yield savings rate went from 0.50% in March 2022 to 4.35% in October 2023 — a passthrough of roughly 73%. Marcus by Goldman Sachs tracked similarly. The big-four banks moved fractionally: Bank of America's savings rate went from 0.01% to approximately 0.01% over the same period.

The asymmetry is even sharper on the way down. When the Fed began cutting in September 2024, Ally's rate dropped from 4.35% to 3.80% within six weeks. Banks move savings rates down faster than they move them up, because there is no regulatory mechanism forcing them to maintain rates during a cutting cycle.

What this means for depositors: the decision about how much to hold in a HYSA versus a CD is partly a bet on the rate trajectory. In a cutting cycle, locking into a CD at the peak rate is valuable. In a tightening cycle that is still ongoing, a HYSA preserves your upside.

As of 15 May 2026, the Fed funds target range sits at 4.25–4.50%. The consensus view among rate-futures markets is one additional 25-basis-point cut in 2026, though the market has mispriced this call repeatedly in both directions over the past four years. Check the CME FedWatch Tool before making duration decisions.