How High Will CD Rates Go?
Whether or not you’ve been paying direct attention to the actions of the Federal Reserve, it’s hard not to notice interest rate increases. It might make you wonder, how high will CD rates go? When you zoom in a little bit, you may be surprised as to what your financial institution, bank or credit union will offer for CD interest rates next.
What Is a Certificate of Deposit?
A certificate of deposit is akin to a high-yield savings account with a bit more regulation. For example, you can earn varying APYs for longer-term or short-term CDs that are above the national average. The main difference for this type of savings is that, though you earn interest on a lump sum for a fixed period of time, the money can’t be touched for the entirety of the term. It has to reach maturity to avoid early withdrawal penalties.
Are CD Rates Expected To Go Higher in 2023?
The Federal Open Market Committee raised the federal funds rate to a range between 5.25% to 5.50% in July of 2023. Rate rises may occur once more before the end of 2023, according to Fed Chairman, Jerome Powell. This could cause higher interest rates for CD accounts. Many think that a 0.50% rate hike is likely by the end of the year.
Predictions for CD Rates in 2024
How high will CD rates go in 2024? Though no rate is set in stone, the outlook for CD rates in 2024 might not be looking up. Despite the steady climb of the federal funds rate, rate hikes could soon plateau and then drop in 2024. Here are some contributing factors to the possible downward trend:
- Recent bank failures
- FOMC and the Fed Board of Governors indicate rates may hit their peak
- Drop is expected after current rate hikes plateau
Predictions for CD Rates in 2025
If you thought CD rates were hard to predict for 2023 or 2024, buckle up as longer-term inflation projections also are expected to maintain their current trajectory or even plateau. Due to this, banks may change the way they think about longer-term rates. Though experts predict a rate of nearly 5% as of December 2023, this could drop to an estimated 3% as of 2025.
What Are the Best CD Rates?
According to the Federal Reserve, the current national average for CD rates is around 1.72% APY. This average rate is for one-year CDs. However, you can get a variety of term lengths ranging from three months to five years, with many banks or credit unions offering APYs above this national average. Here are some financial institutions that offer great CD terms:
- American Express National Bank, Member FDIC, 12-month CD: Annual Percentage Yield (APY)
- Barclay’s Bank 12-month CD: APY
- Capital One 18-month CD: APY
- Discover Bank 2-year CD: APY
- Tab Bank 1-year CD: APY
Final Take To GO
Oh, the places CD rates will go in this tumultuous economic climate. How high will CD rates go? Though nothing is set in stone, there are several adjustments to CD rates to look for by the end of 2023. In fact, look for a potential rate hike of 0.50% in the fourth quarter around December 2023.
FAQ
Here are some answers to frequently asked questions about how high CD rates will go.- What will CD rates be at the end of 2023?
- Rate rises may occur once more before the end of 2023, according to Fed Chairman, Jerome Powell. Another Fed rate hike of 0.50% is likely in addition to an increase in the federal funds rate.
- Will CD rates drop in 2024?
- Yes, though there has been a steady climb of the federal funds rate as of late, rate hikes could soon plateau and drop in 2024. Contributing factors to the possible downward trend include:
- The recent bank failures
- The Federal Open Market Committee and Board of Governors of the Fed indicate rates may hit their peak and will possibly drop
- Yes, though there has been a steady climb of the federal funds rate as of late, rate hikes could soon plateau and drop in 2024. Contributing factors to the possible downward trend include:
- What will CD rates be in 2025?
- Though nothing is certain, 2025 could show changes to current CD rates. Due to the fact longer-term inflation is expected to maintain its course, banks may change the way they think about longer-term rates. Though experts predict rates to be near 5% as of December of 2023, this could drop to an estimated 3% in 2025.
- How much does a $10,000 CD make in a year?
- How much a $10,000 CD makes in a year depends on what APY your bank offers. For instance, if you invested $10,000 in a 1-year CD at the national average rate of 1.72% APY, you would have earned $172. This gives you a total of $10,172 at the end of 12 months.
- Is a CD better than a savings account?
- Any savings is good savings but where a CD differs from a standard savings account is that it often earns a higher APY. This means you can yield a higher return on your investment. However, be aware that deposits put into a CD must stay there for the entirety of the term length. Attempting to access the funds early could result in early withdrawal penalties.
- What is a good CD rate?
- Typically, anything over the national average of 1.72% APY is considered to be a good CD rate. However, there are many banks or credit unions offering CD APYs ranging between 4% to 6%, such as the following:
- American Express National Bank 12-month CD: 4.25% APY
- Barclay's Bank 12-month CD: 5.50% APY
- Capital One 18-month CD: 5.00% APY
- Discover Bank 2-year CD: 4.40% APY
- Tab Bank 1-year CD: 5.27% APY
- Typically, anything over the national average of 1.72% APY is considered to be a good CD rate. However, there are many banks or credit unions offering CD APYs ranging between 4% to 6%, such as the following:
- What is the highest-paying CD rate right now?
- The current highest-paying CD rate right now is at Alpena Alcona Area Credit Union. You can earn 7.19% APY on a 7-month CD. However, there are several qualifications and limitations to getting this CD rate.
Rates are subject to change; unless otherwise noted, rates are updated periodically. All other information on accounts is accurate as of Aug. 21, 2023.
Editorial Note: This content is not provided by American Express. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by American Express. American Express credit card products are not available through GOBankingRates.com.
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- Forbes. 2023. "CD Interest Rates Forecast: How Good Will They Get In 2023?"
- Money Crashers. 2023. "CD Rates 2023 – Where Are They & Will They Go Up?"
- FDIC. 2023. "National Rates and Rate Caps."
- CNET. 2023. "Don’t Wait for Another Fed Rate Hike. Experts Say Now Is the Time to Lock In a Long-Term CD."
