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When inflation slows, things get a little easier on your wallet. The cost of everything from groceries to gas to borrowing money can fall, and sometimes prices fall drastically too.

What's the downside to falling inflation? It means lower interest rates on savings accounts and certificates of deposit (CDs).

Early this year, inflation and interest rates were expected to fall, which spelled good news for borrowers but bad news for savers. However, between new tariffs, mass federal layoffs, and worker deportations, the economy holds a lot of uncertainty. As a result, the Federal Reserve — the agency responsible for making interest rate cuts and hikes — isn't planning to make any changes soon.

In other words, savings and CD rates aren't likely to fall (or rise) much in the next few months.

How are inflation and interest rates related?

Inflation and interest rates have a direct relationship, meaning when inflation rises, so do interest rates. When inflation falls, rates tend to drop too.

Remember 2021, for example, when the average interest rate on a 30-year mortgage was just 2.96%? Then, after inflation spiked to an average of 7.1% in 2022, the average mortgage rate shot up to 5.34%. During that same time, the national average rate for 12-month CDs went from 0.13% to 1.07%.

As you can see, borrowing money gets more expensive when inflation goes up, but your savings balances also grow faster. Here are some of the accounts where your rate might increase when inflation goes up:

Read more: How to protect your savings against inflation

Does inflation impact savings account and CD rates?

Inflation has a major impact on savings and CD rates. If inflation is too high or low, you'll likely notice a change in the interest rates on your bank accounts within a few months. Here's an example of what can happen:

1. Prices increase : Consumer goods like food, utilities, and cars get more expensive.

2. The Fed steps in : The Federal Reserve increases the federal funds rate , a strategy it uses to slow economic activity and bring inflation down toward its 2% target.

3. Banks react : Banks increase interest rates on loans and deposit accounts.

It's worth keeping in mind that inflation isn't the only reason banks change their deposit rates. For example, a bank might offer higher rates on savings accounts to attract new customers and more deposits.

Read more: How do banks set their savings account interest rates?

The downside? While savings account interest rates are variable, meaning they rise and fall with market conditions, CD rates are fixed. Although you may be able to lock in a higher CD rate when inflation is elevated, your account could lose purchasing power if inflation and rates continue to increase while your money is tied up. In this case, you’ll have to wait until the CD reaches maturity to move your funds into a higher-earning account or pay a penalty to break your CD term early.

How to maximize your savings return when inflation is going up or down

Regardless of what's happening with inflation, there are ways to earn more interest on your money. Here's how you can maximize your savings:

Shop around

Whether rates are high or low, shopping around for high-interest bank accounts can help you earn more. For example, the current national average rate for savings accounts is just 0.41%, but some of the best high-yield savings accounts pay over 4% .

Read the fine print

Take a good look at the terms and conditions of your bank accounts. The information you read can help you avoid unwanted fees, like the monthly maintenance fees that often kick in when your balance drops below a set minimum amount. Fees quickly wipe out your interest earnings.

Also, if the account has tiered interest rates — meaning different rates apply to different deposit amounts in your account — make sure you can afford to maintain the balance required for the highest rate.

Be smart with fixed rates

Accounts that have fixed interest rates, such as CDs and Treasury bills , require a bit of extra strategy. If interest rates are high or are likely to drop soon, look for a fixed-rate account that lets you lock in a high rate for as long as possible. If rates are likely to increase soon, choose a fixed-rate account with a shorter term.

Read more: Are CD rates going up or down in 2025?

Consider taxes

When choosing between savings accounts, CDs, or T-bills, interest rates aren't the only factor to consider. Be sure to think about the tax implications for each account too.

With savings accounts and CDs, you have to pay both federal and state taxes on the interest you earn. With T-bills, however, you don't have to pay state taxes.

Read more: How to avoid taxes on savings account interest