MM Money

Bank Accounts Fail To Follow Fed's Lead

The Federal Reserve raised the nation's key short-term interest rate yesterday, but bank customers probably won't notice it. If the recent past is any guide, only a fraction of that increase is likely to find its way into savers' pockets.

With its latest move, the Fed pushed up the benchmark federal-funds rate -- the rate banks charge each other for overnight loans -- by a quarter-percentage point, to 2%. That's a full percentage point higher than it was before the Fed began its recent series of gradual rate increases in late June.

Higher interest rates should be good news for savers, who've seen returns dwindle during recent years. But rates on savings, interest-bearing checking and money-market deposit accounts have hardly budged in recent months. For instance, the average savings account pays just 0.51%, according to Informa Research Services, a market-research firm.