Will CD Rates Return to 6%?

After a Fall Peak, Today’s Best CD Rates Are a Bit Lower

Two years ago, what you could earn by locking your money in a certificate of deposit (CD) was underwhelming. On the shorter end of the spectrum, the best nationally available 6-month CD was offering 0.80% APY, while you could only earn as much as 1.50% APY with a whopping 5-year commitment.

But in March 2022, the Federal Reserve began an aggressive inflation-fighting campaign that delivered 11 interest rate hikes over 17 months, with the most recent one arriving last July. That fast-and-furious rise in the federal funds rate pushed banks and credit unions to dramatically raise the interest offered on high-yield savings accounts, money market accounts, and certificates of deposit.

For CDs, the rate run-up culminated in a peak this past fall, with various CD terms seeing their highest nationwide rate recorded between September and November. The granddaddy of them all was a brief nationwide leader that paid 6.50% for about a week in October. Two other terms meanwhile set records of 6.00% APY.

But since July, the Federal Reserve has kept the federal funds rate steady, and financial markets generally expect the Fed’s rate-hike campaign has reached its end. As a result, banks and credit unions have eased off the rates they’re offering, with December and January seeing the top rate in each term move to slightly lower ground.

Could CD Rates Rise Back to 6%

What happens going forward is unknown, as it depends heavily on the future path for inflation rates. At their last rate-setting meeting, on Dec. 13, the Fed released its quarterly “dot plot” report, which showed that the median expectation among the committee’s 19 members was that they would implement three rate cuts sometime in 2024. That would reduce the fed funds rate by 0.75% and would in turn trigger banks and credit unions to lower their deposit rates.

Financial markets also expect to see rate cuts in 2024. However, these are just moment-in-time predictions, and even though most Fed members believed in December that rate cuts were on the 2024 horizon, they’ve also made it clear that if inflation doesn’t come down enough—or does not seem to be sustainably lowered—another rate increase is still on the table.

For CDs to reach back into 6% territory, now that they’ve fallen below that level, it seems another Fed hike would be necessary. Though that’s certainly possible, it’s a minority prediction right now. More likely is that the federal funds rate will stay steady or be reduced in 2024.

Forecasting what the Fed will do with rates months or years into the future is always an unreliable exercise. Perhaps the next several jobs and inflation reports will continue to show positive developments, giving the Fed the confidence it needs to pull the trigger on the first rate cut. But if inflation wavers—or worse, shows signs of climbing—the Fed will be hesitant to take its foot off the gas, which could keep CD rates at today’s high levels for longer than expected.

Advice for CD Shoppers

Though the fall’s peak rates are no longer available, what you can earn today on a CD is still historically remarkable. In every term, you have options paying at least in the upper 4% range, and in the shorter to mid-terms, you can earn in the mid 5% range. When you consider that these rates are guaranteed for the entire CD term—no matter what happens with the Fed—these are excellent rates to lock in now.

How We Find the Best Savings and CD Rates

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account’s minimum initial deposit must not exceed $25,000.

Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don’t meet other eligibility criteria (e.g., you don’t live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.