As many had expected, the Fed cut the target federal funds rate today from 4.50% to 4.25%. Here’s how the Fed explained the decision:

Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks. Today’s action, combined with the policy actions taken earlier, should help promote moderate growth over time.

Apparently, they were more concerned with recession than inflation. They admitted that the elevated energy and commodity prices may “put upward pressure on inflation.” Perhaps this prevented them from cutting by 50 basis points. One of the FOMC members did vote against the 25 basis point cut in favor of a 50 basis point cut.

So with this new rate cut, it’s likely we’ll see a continuation of savings account and CD rate cuts that we’ve seen in the last few months. With the Fed rate now a whole percentage point lower, 5% for CDs and savings accounts may become as difficult to find as 6% was earlier in the year.

There are a few online savings accounts with rates over 5% that have held their rates steady since the Fed started cutting rates. These include OneUnited and Savings Square. Others like Countrywide, Zions and UFB Direct have lowered their rates, but have kept rates well above 5%. It may be only a matter of time before we also see major cuts at these accounts. If you want to avoid experiencing a rate drop right after opening one of these savings accounts, you can try one of the three savings account promos that are guaranteeing the rate for 3 months. This includes EverBank’s 5.51% money market and checking promo, UmbrellaBank’s 5.50% savings account promo, and AmTrustDirect’s 5.26% savings account promo. The only other alternative for a longer lock is a CD, but these rates are dropping even faster than the savings account rates.