Marcus – the retail bank arm of Goldman Sachs – and Ally Bank both lowered the yield on their savings accounts ahead of an expected rate cut from the Federal Reserve next month.
Marcus lowered its rate to 2.15% from 2.25%, while Ally reduced its yield to 2.1% from 2.2%. Both banks informed their customers by email.
Ally said the move reflected how interest rates are “on the downswing and projected to fall further,” according to an email sent to customers.
Marcus also said the its rate reduction was “based on market conditions,” according to an emailed statement from Goldman Sachs spokesman Andrew Williams.
“We aim to always provide competitive rates on all our savings products,” the statement said. “Our online savings account remains more than 4X the national average, and all new and existing customers enjoy the same rate.”
Goodbye high savings rates?
So far, Marcus and Ally are the first to cut rates and don’t yet reflect a bigger trend, said Greg McBride, chief financial analyst at Bankrate.com.
“In fact, just this week Wealthfront increased the payout on their account,” he said. “The savings landscape continues to be very competitive, which is benefiting consumers, and is helping keep savings yields largely in check – for now.”
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Wealthfront on Wednesday upped the yield on its cash account to 2.57% from 2.51%. Unlike a traditional savings account, a cash account is tied to a brokerage account. The funds are eligible for FDIC insurance through banks partnering with Wealthfront.
There are also more than a handful of banks advertising yields above the 2.15% that Goldman and the 2.1% that Ally are offering, according to an accounting from Bankrate. The top ones include Vio Bank at 2.52%, WebBank at 2.5% and Comenity Direct Bank at 2.48%.
What about CDs?
McBride noted that while savings account yields aren’t changing, rates on certificates of deposits are falling, especially as expectations for a cut in the federal funds rate increases.
“No bank wants to be locked into an above-market payout for any length of time,” he said.
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Investors are expecting a rate cut at the Federal Reserve’s next meeting at the end of July. Seven in 10 are forecasting a quarter-point reduction, while three in 10 predict a half-point drop, according to CME Group’s FedWatch Tool.
That could be enough to affect what banks offer on their savings accounts.
“Yields on savings accounts can be adjusted at any time, which is another reason why they’re hanging in there now,” McBride said. “But a broader move is likely to materialize around the time of an actual Fed rate move.”