Higher Interest Rates Bring Benefits for Savers Amid Inflation Fight

The Federal Reserve raised benchmark borrowing costs by a quarter of a percentage point in an effort to combat inflation, which has been on the rise for months. This move pushed up interest rates for loans like credit cards and mortgages, but it also brought some benefits for savers.

According to James Cox, a financial advisor and managing partner of Virginia-based Harris Financial Group, higher interest rates incentivize people to park their money in banks and spend less of it. If you have accumulated assets, higher interest rates can be beneficial, he said.

The hike in borrowing costs makes it more lucrative for banks to hold money, which puts pressure on financial institutions to pass along some of those earnings to depositors through higher yields. As a result, some banks have bid up each other's yield offerings to attract customers.

High-yield savings accounts and certificates of deposit (CDs) are options that investors can use to take advantage of the favorable environment for savers. A high-yield savings account can offer as much as 4.2% annual percentage yield, which is well above the nationwide average of 0.64% for savings accounts.