Interest rate decisions are announced as a single number, yet savings accounts respond unevenly and often slowly. The gap comes from the several transmission steps between an interbank rate and a retail deposit.
The rate applies to banks, not customers
The federal funds rate is the cost of overnight borrowing between banks holding reserves. No consumer product is priced directly off it by rule.
The central bank steers that rate by adjusting what it pays on reserves and what it charges in short-term operations. Those tools set the floor and ceiling of a corridor.
Everything a household experiences afterward is a bank's own decision, made in response to the new cost of funds rather than because of any requirement to pass it along.
Deposits compete with wholesale funding
A bank funds its lending from deposits and from borrowing in money markets. When market rates rise, wholesale funding becomes expensive and deposits become relatively more attractive to the bank.
If a bank already holds more deposits than it can lend out, it has little reason to pay more for them. This is the main reason deposit rates lag policy changes.
Banks with tighter funding positions move first, which is why online institutions and smaller banks often post higher yields than large branch networks during the same period.
Different products reprice on different clocks
Money market funds hold short-term instruments that mature constantly, so their yields track policy within weeks. Certificates of deposit are fixed at issue and reprice only at renewal.
Ordinary savings accounts have no maturity at all, and the rate is set at the bank's discretion. It can be changed at any time, in either direction, without notice beyond disclosure requirements.
The asymmetry is well documented over long periods: deposit rates tend to rise slowly when policy tightens and fall quickly when it eases.
Loan pricing follows a separate path
Many consumer loans reference a published prime rate, which large banks adjust in step with policy. Variable-rate credit lines therefore move almost immediately.
Longer-term borrowing, including most mortgages, is priced off expectations of future rates rather than today's overnight rate. Those expectations can move opposite to a current decision.
This explains a recurring confusion, in which a short-term rate rises while long-term borrowing costs fall. The two are answering different questions about time.
What the mechanism does not tell you
The transmission chain describes how rates move through the system. It does not indicate where rates will go next, and forecasts of that path have a poor record.
Comparing posted yields across institutions and reading the terms on renewal is a matter of household record-keeping. Decisions about specific accounts are worth discussing with a licensed financial professional.