Investment and deposit accounts that may benefit most from Fed rate hikes: How many do you have?
Editorial staff, J.P. Morgan Wealth Management
- Variable-rate options such as money market accounts, money market funds and high-yield savings accounts may reprice relatively quickly after the Fed raises interest rates, though timing and size of changes can vary by provider and product.
- CDs and short-term Treasuries can help savers lock in higher yields, but liquidity, early-withdrawal terms, insurance and market risk differ by product.
- The best choices depend on your goals, time horizon, access needs, risk tolerance, and whether you want federal deposit insurance or U.S. government backing.
On September 16, 2026, the Federal Open Market Committee (FOMC) increased the federal funds rate by 25 basis points to a target range of 3.75% to 4.00%. This marked the first increase in the benchmark interest rate since July 2023. But what does it mean for your accounts?
Most banks adjust their prime rates in response to Federal Reserve rate changes, with hikes putting upward pressure on borrowing costs. However, the impact doesn’t end there. Banks also tend to adjust the yields on savings and cash-management vehicles, such as money market accounts (MMAs), money market funds (MMFs), certificates of deposit (CDs) and high-yield savings accounts. The increase in rates on those products is a good thing since it means you could earn more.
If you have money to save and invest, the current rate environment may actually work in your favor. However, to benefit, your money will need to be in the right accounts and investment vehicles.
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Accounts and investments that may benefit from a Fed rate hike
From deposit accounts to short-term investments, here are several options that may offer higher yields after a Fed rate hike and the tradeoffs to consider for each. It’s important to note, though, that the rate increases may happen at different times on different products; some may reflect the Fed’s rate hike within days, while others may not change rates for weeks or months.
Money market funds (MMFs)
MMFs are pooled investment vehicles that invest in short-term, low-risk, high-quality debt securities. The three main types are government MMFs, prime MMFs and municipal MMFs – the last of which generally generate income that is exempt from federal income tax. Returns tend to move with short-term interest rates, so Fed rate hikes can quickly translate into higher MMF yields.
MMFs may offer higher returns than you might get with deposit accounts while retaining liquidity and offering potential tax benefits. However, unlike MMAs, they are investment products. While they’re generally considered low risk, including when compared to many bond funds, they are not FDIC-insured, and it is still possible to lose money.
If you’re considering MMFs, you may want to shop around and compare key metrics, such as each fund’s expense ratio, underlying holdings, minimum investment requirements and the standardized seven-day yield metric (SEC 7-day yield).
Money market accounts (MMAs)
An MMA is a hybrid deposit account that offers features of both checking and savings accounts. MMAs generally pay higher rates than traditional savings accounts, and their rates also tend to move with the federal funds rate. Money in an MMA is protected by federal deposit insurance.
Many MMAs offer access via ATM, electronic transfer, and sometimes checks or a debit card, depending on the institution. They also tend to have higher minimum balance requirements and more variance in annual percentage yields (APYs) across providers. While the nationwide average rate on MMAs is currently 0.63%, you may be able to find rates that are more closely aligned with the current federal funds rate.
These accounts may be useful for short-term savings goals and large upcoming expenses, especially when you want to maintain direct access to your money via check or debit card. For example, you might use an MMA to set aside funds for estimated taxes, semiannual bills like property taxes or a down payment when you’re saving money to buy a house.
When comparing MMAs, check the APY, fees, minimum balance requirements, access features, and whether deposits are insured (and up to what limits).
Certificates of deposit (CDs)
A CD is a deposit account that pays interest in exchange for keeping a sum of money deposited for a set term. For example, a bank may offer a 4.35% APY if you deposit at least $500 and keep it in the CD for 18 months.
Unlike the other options on this list, CDs generally have fixed interest rates. That means changes to the Fed rate won’t impact a fixed interest rate if you’re already locked into a CD for a set term. However, Fed rate changes will often impact rates on new CDs.
A CD can be a good option if you have money you don’t need to touch for a set period, particularly if you expect interest rates to fall soon. Keep in mind, though, that you could forfeit interest or face a reduction in your balance if you make a withdrawal before the end of the CD’s term. One strategy to consider with CDs is CD laddering, which can help preserve access to a portion of money at regular intervals.
When shopping for a CD, consider APYs, term lengths and policies on early withdrawals. You may also want to check if you can secure a similar APY elsewhere without a time commitment.
High-yield savings accounts (HYSAs)
A HYSA is a deposit account that offers a higher APY than the average traditional savings account. For example, traditional savings accounts had an average interest rate of 0.37% in September 2026, while HYSAs may offer more competitive APYs.
Providers of these accounts tend to respond quickly to Fed rate changes. Many promptly lower yields after Fed rate cuts to preserve profits and raise them after hikes to remain competitive. As a result, many HYSAs will likely get a little boost from the Fed rate increase that happened in September.
HYSAs may be a good place to keep your emergency fund and savings for medium-term goals of three to five years. They typically allow easier access to your funds, primarily via electronic transfers, and may offer decent returns without exposure to stock market fluctuations. Federal deposit insurance is also commonly available to protect against bank failures.
To find a competitive HYSA, it helps to compare not only APYs but also minimum balance requirements, account fees, federal deposit insurance and sign-up promotions.
Other rate-sensitive vehicles worth knowing about
Along with the options above, here are a few additional vehicles that tend to be sensitive to Fed rate changes:
- U.S. Treasury bills and short-term Treasuries: Treasury bills (T-bills) are bought at a discount and pay full face value at maturity (within four to 52 weeks). The yields on newly issued T-bills and other short-term Treasuries tend to move closely in line with the federal funds rate, meaning Fed rate hikes often translate into higher yields on new purchases.
- Treasury MMFs: Treasury MMFs are a subset of MMFs that invest primarily in U.S. Treasury debt securities. Their yields tend to follow the trajectory of short-term interest rates.
- I bonds and inflation-linked savings: I bonds earn interest for up to 30 years, with interest accruing monthly and compounding every six months. You can cash out in as little as 12 months, but you lose three months of interest if you cash out before the five-year mark. Unlike the above vehicles, the rates are tied to inflation, so they don’t directly respond to Fed rate changes.
- Brokered CDs: Brokered CDs are CDs offered through intermediary deposit brokers. You can generally sell brokered CDs before maturity on secondary markets without paying early-withdrawal penalties. However, your sale price will be based on the CD’s current market price, which Fed rate changes often impact.
- Cash-management accounts (CMAs): CMAs are accounts offered by brokerages and other nonbank financial institutions that combine features of checking and savings accounts. They often offer competitive APYs that follow the Fed rate. Cash may be swept into partner banks, where it may qualify for pass-through FDIC insurance.
- Rewards checking: Some banks offer rewards checking accounts with APYs that may increase following Fed rate hikes. However, APYs are often lower than those of HYSAs, and accounts could come with balance caps and activity requirements.
Smart moves for savers and investors to consider right now
Whenever the Fed makes a rate change, such as a hike, it may be a good time to review your financial accounts and the yields you’re earning.
Consider the various account types on the market and shop around to compare different offerings. For example, if you have idle cash in a low-interest checking or traditional savings account, you can likely generate stronger returns with an MMA, MMF, CD or HYSA. The right fit will depend on factors like your plans for the money, time horizon, access needs and risk tolerance.
Additionally, as you shop around, you may want to ensure that any deposit account you choose offers sufficient federal deposit insurance, either from the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA).
The bottom line and what to watch next
Following the first interest rate hike in more than three years, Fed Chair Kevin Warsh reaffirmed the central bank’s commitment to restoring price stability and acting as needed to bring inflation toward its 2% goal. Whether this marks the beginning of a series of rate hikes remains to be seen. In the meantime, higher yields on rate-sensitive accounts and investments like these may benefit investors. The key is making sure your cash is well positioned to benefit, which may mean using several accounts for different purposes.
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