Inflation Is at 4.2%: These Savings Accounts Are Outpacing It
If you don’t think your purchasing power is the same as it was even a few months ago, you’re not alone. The Bureau of Labor Statistics released its May CPI report, showing inflation rose 0.5% for the month, bringing the annual inflation rate to 4.20%, the highest it’s been in three years.
Fuel costs remain the primary catalyst for these trends. As the conflict in Iran persists, expensive energy continues to inflate the price of everything from airfare to groceries.
What’s more, if you’re trying to shelter your cash from rising prices, it’s hard to find many savings accounts outpacing the current rate. I’ll show you the few savings accounts I found that will keep you ahead of inflation, what the inflation number means for Federal Reserve policy and other steps you should consider.
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These are the savings accounts outpacing inflation
Letting your cash sit in a savings account that doesn’t outpace inflation means you’re losing money every day, and these days, it’s nearly impossible to find a savings account that does outpace inflation.
Your best option is a jumbo CD, the only CD type offering rates that outpace inflation at its current level. As its name implies, a jumbo CD requires a larger deposit, usually $50,000 to $100,000. The good news is that many of the maturity windows fall within six months to a year, giving you time to earn thousands of dollars effortlessly, with the flexibility to pivot if prices continue to rise.
With this in mind, here are two accounts to consider, both requiring $100,000 minimum deposits, and both with rates higher than the current inflation rate:
Another option I would consider is a high-yield savings account, but look carefully at the rates, as many don’t outpace current inflation. Newtek Bank offers a savings account earning 4.20% APY with no monthly fees. While it won’t keep you ahead of inflation, you’ll at least break even.
The benefit of this account is that you build your savings without tying your money up as you would with a jumbo CD. It makes this account perfect for those looking to build an emergency fund or to achieve short-term savings goals with cash flexibility. Plus, if inflation continues to rise, the Federal Reserve might have to look at raising rates, which would mean the rate on a high-yield savings account would also adjust upward.
Will this inflation news change Fed policy?
(Image credit: Getty Images)
Not in the interim. The Fed meets on June 16-17, with the CME Group FedWatch projecting a 96% probability they’ll leave rates alone.
That said, Cleveland Federal Reserve President Beth Hammack believes changes must come if inflation continues to rise. In a speech to the City Club of Cleveland on June 2, she said that, currently, monetary policy alone might not be enough to bring inflation down to the Fed’s target rate of 2%.
She added that if higher inflation becomes embedded in the economy, bolder moves, such as rate hikes, might be needed to help the Fed achieve its inflation target.
And this might be the trend we see play out. Unless something changes in the Middle East, “gasoline and other fuel prices will continue rising in the coming months,” writes David Payne, staff economist and reporter for The Kiplinger Letter, in the Kiplinger inflation outlook.
“Food prices will also start rising in the future, as one-third of the world’s fertilizer supply is produced in the Persian Gulf region, along with 10% of aluminum, used in everything from jets to soda cans.” If core inflation continues to rise, it might make the Fed consider a rate hike to help bring inflation down to its intended target.
What should you do amid rising inflation?
First, make sure you have an emergency savings fund with at least six months of expenses in a high-yield savings account. I suggest using Newtek Bank in the interim since it’s the only one earning the same rate as inflation.
Once you reach your savings goal, I recommend investing more of your money in the stock market, where returns might protect your cash from inflationary pressures. Kiplinger Personal Finance Magazine recently released our annual feature on where to find top yields for the rest of 2026, and you can also take a look at our picks for the best Vanguard ETFs and highest-yielding dividend stocks in the S&P 500, for more liquidity.
And if you need help on where to invest your money, use this Bankrate tool to find a reputable adviser to assist you, as they can create a plan based on your finances, goals and risk profile:
