The Overnight RateAt the national average savings rate of 0.38%, $1,000 begets $3.80 a year (FDIC). Since Thursday, the Fed pays banks 3.90% on their reserves (Fed).
- Receipt on Friday’s issue, and it’s a miss. I said I’d give the 2-year Treasury yield more weight than Polymarket’s odds on an October hike. The 2-year closed Friday at 4.76%, above Wednesday’s 4.74 (Treasury). An October hike ran to 56% by Saturday and sits at 51% this morning (Polymarket). The crowd was a day early, and I was wrong.
- Two or more hikes this year is 86% on Polymarket, from 81% Friday morning (Polymarket). A US recession by year-end is 7%, from 17% last Tuesday night (Polymarket). More hikes and less recession, priced in the same week. I read that as a bet the consumer keeps paying.
- An Iran-Oman agreement on shipping through the Strait of Hormuz by Oct 31 went from 27% Saturday to 35% this morning (Polymarket). Diesel set another AAA record today at $6.51, a new high five mornings running (AAA). The pump is pricing the other 65%.
What changed in your bills
- Home equity lines and cards: prime has been 7.00% since Thursday (Bank of America). A line priced at prime plus 1 is now 8.00%, and the new rate starts showing up on the next statement.
- Fuel: regular gas is $4.48 and diesel $6.51 this morning. Diesel is up 28 cents in a week and 76% in a year (AAA).
- Mortgages: Freddie Mac’s weekly average is 6.95% (Freddie Mac), and Mortgage News Daily’s daily index ended Friday at 7.20% (Mortgage News Daily). Freddie Mac publishes again Thursday at noon.
- Social Security: the Senior Citizens League projects a 3.5% raise for 2027. The formula’s last input, September’s CPI-W, and the official number both land Oct 14 (TSCL).
Who pays: the savings account
The Fed raised the rate it pays banks on their reserves to 3.90%, effective Thursday (Fed implementation note). Prime went to 7.00% the same morning (Bank of America), and card and home equity contracts follow prime by design.
Savings rates follow whatever the bank decides. The FDIC’s latest national averages, published before the hike, have a savings account at 0.38%, a money market account at 0.63% and a 12-month CD at 1.71% (FDIC).
The mechanism, once: a bank’s lending rates reprice with prime the day the Fed moves, and its deposit rates reprice when a competitor makes it. Payer: anyone keeping cash at the national average. Payee: the bank’s margin, the gap between what that money earns and what the bank pays for it. The quarter point reached borrowers overnight. I doubt the national average savings rate picks up a quarter point by Christmas.
Net net: the hike reached what households pay by Thursday morning, and what they earn on a savings account waits on the bank.
Headlines
- New Hampshire’s governor said Sept. 2 she’ll put a multi-year data center moratorium in her next budget, which means July 2027 at the earliest, and said ISO-New England’s head confirmed a large data center would raise power prices across the region (NHPR). Wednesday’s 417 to 3 House vote asked the same question nationally: whose bill.
- A week ago the CEOs of Anthropic and OpenAI backed slowing development of the most advanced AI models, and the PHLX semiconductor index sank almost 6% that day, its worst since early July (CNN). The customers said slower, and the chip stocks heard fewer orders.
The first FDIC averages to include the hike are due Oct. 19.