Interest rates up, but not on your savings account

The Indicator from Planet Money

NPR

Business

4.7 • 9.2K Ratings

🗓️ 21 December 2022

⏱️ 9 minutes

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Summary

When the Fed hikes interest rates, the interest rate on your savings account usually follows in step. But recently, that logic hasn't held up. We ask an economist and a community banker why.

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Transcript

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0:00.0	NPR.
0:12.4	This is the indicator from Planet Money, I'm Whalen Wong.
0:15.1	And I'm Adrian Ma.
0:16.4	We've been watching the Federal Reserve raise interest rates pretty aggressively for most
0:20.6	this year, and tweaking interest rates is one of the main policy tools the Fed has.
0:26.0	But when it uses this tool, there are effects that ripple throughout the economy.
0:30.7	For example, rates on credit cards have gone up.
0:32.9	They're at 20%.
0:34.4	Mortgage rates have shot up to, they're over 6%.
0:37.3	And then, they're the interest rates that we get on our savings accounts.
0:41.0	You know, for parking your money there, you get a little sum sum.
0:44.1	Today the average national rate is 0.3%.
0:48.0	Which, now I guess that I'm saying it is basically nothing.
0:51.7	The sad trombone of rates.
0:53.6	Not sum sum, more like nothing.
0:55.5	More like, wap wap.
0:58.7	Right now, consumers are paying more interest when they borrow money, but they're not earning
1:03.2	more interest on their savings accounts.
1:05.4	And these stubbornly low interest rates have even caught the attention of lawmakers like
1:09.2	Michael San Nicholas of Guam.
1:11.1	He asked Wall Street bank CEOs about it at a congressional hearing in September.
1:14.9	One of the only silver linings in a rising interest rate environment is that savers are
	...

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