How low can interest rates go?

This post comes from AnnaMaria Andriotis at partner site SmartMoney.

Saving money may soon get even less rewarding. The Federal Reserve's announcement Wednesday to keep short-term interest rates near zero through 2014 may result in still lower interest rates on bank accounts, analysts say.

How low? Rates on savings accounts may drop closer to 0% over the next 12 to 18 months, says Dan Geller, executive vice president at Market Rates Insight.

Even though the federal funds rate has been stuck at 0% to 0.25% since late 2008, banks continue to lower interest rates on their accounts. The average rate on savings accounts is 0.36%, down from 0.4% in November, according to MRI. One-year and five-year certificates of deposit have an average yield of 0.33% and 1.57%, respectively.

Even worse, savers will have to put up with nearly nonexistent returns for at least another three years before they can see any meaningful improvement, says Greg McBride, senior financial analyst at Bankrate.com. Post continues below.

What's a saver to do?

In general, advisers still recommend that emergency funds -- money to cover about six months' worth of living expenses -- be held in bank accounts where the principal is 100% guaranteed. Given that rates are expected to stay low for the long run, stashing that money in a CD comes with less risk, because the saver is unlikely to miss out on rising rates elsewhere and because several banks, including Bank of America and PNC Bank, allow customers to withdraw money from a CD without incurring a penalty. Other banks, like Ally Bank and Sovereign Bank, are telling customers that if rates do happen to rise, they'll raise the rate on their existing CD as well.

For customers on the hunt for safety, yield and liquidity, one account stands out: Capital One is offering a 1.01% rate that's guaranteed for one year on its high-yield checking account. Meanwhile, the highest rate on savings and money market accounts is 0.90% at Sallie Mae and Discover Bank, according to Bankrate.com.

Experts also suggest looking at community banks and credit unions that may promote higher rates in an attempt to land more customers.

Good news for homebuyers

While the rewards of saving are meager, borrowers may be able to benefit from these lower rates, at least in the near term. The Fed is hoping its rates will stimulate lending, in particular nudging more would-be homeowners into signing up for mortgages. Because the Fed is keeping interest rates low, banks are more willing to lower the rates they charge on mortgages, says Geller, which could lead to more lending activity.

Mortgage rates are already at record lows, but Geller says borrowers could see them drop even further, with mortgage rates falling by as much as 50 basis points. Here's why: In general, banks have at least a 3-percentage-point spread between the rates they offer on their deposit accounts and the rates they charge on mortgages, says Geller. That spread is currently at 3.5 percentage points, he says, so it still has some room to drop.

More on SmartMoney and MSN Money:

• Breaking down the new Fed forecasts
• 10 things debit card issuers won't tell you
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• Today's best savings rates
• 7 smart moves while rates are low
• How much will my savings grow?