CD Rates Forecast 2025: Will CD Rates Go Up?

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Certificates of deposit (CDs) are popular savings vehicles that offer predictable returns.

But because CD rates are closely tied to Federal Reserve policies, they can fluctuate with changes in economic conditions — making the CD rates forecast a hot topic.

Read on to learn how economic indicators, interest rate decisions, and other factors may affect CD rates in 2025 and beyond.

How the Federal Funds Rate Influences CD Rates

The Federal Reserve (the Fed) sets the federal funds rate, which directly impacts what banks charge one another for overnight loans. When the Fed raises or lowers this rate, banks often adjust their CD rates accordingly. Typically:

• Rising Rates: Occur when the economy is growing rapidly or inflation is running high, causing the Fed to tighten monetary policy and slow inflation.
• Falling Rates: Occurs when economic growth stalls and inflation concerns subside, prompting the Fed to lower rates to encourage borrowing and spending.

Because CDs are insured, shorter-term investments, their yields tend to be lower than longer-term bonds but competition among financial institutions can narrow this gap.

Current CD Rate Trends

After hovering near historic lows during the pandemic, CD rates surged in 2022 and early 2023 as the Fed raised interest rates to combat high inflation.

However, the Fed began cutting rates in 2024, leading to a mild drop in average CD yields.

Here’s a look at how they changed, using data from the Federal Reserve:

CD Rates Forecast for 2025

When the Fed last cut rates in December 2024 — its third reduction of the year — many analysts and the Fed itself initially predicted more cuts in 2025. However, as of February 2025, no additional cuts have occurred. Fed Chair Jerome Powell noted on February 11 that “we do not need to be in a hurry to adjust our policy stance,” signaling that higher-than-anticipated inflation could delay further cuts.

• Economist Outlook: Some experts now predict the Fed might keep rates steady, leaving 1-year CDs around 1.83% and 5-year CDs at roughly 1.32% (the national averages).
• Bank Shopping: These averages don’t tell the full story. Online-only banks often offer significantly higher yields, so be sure to compare rates before committing your funds.

Will CD Rates Go Up in 2025?

CD rates generally rise when the Fed fights inflation by increasing the federal funds rate. Currently:

• Scenario 1: Inflation Persists
  If inflation continues to climb, the Fed may return to rate hikes, driving CD rates higher.
• Scenario 2: Inflation Drops
  If inflation moderates, the Fed could restart cuts later in 2025, likely reducing average CD rates.
• Scenario 3: Status Quo
  As suggested by some analysts, the Fed may hold rates steady for much of 2025, keeping CD yields near current levels.

Given these uncertainties, it’s possible that CD rates could go up, stay flat, or decline in 2025.

How To Plan Your Savings Around CD Rate Predictions

Because the CD rates forecast for the rest of 2025 is murky, a CD ladder may be your best strategy. With a ladder:

1. Divide Your Investment: Invest equal amounts into multiple CDs with staggered maturities (e.g., 1-year, 2-year, 3-year, etc.).
2. Maintain Flexibility: When one CD matures, you can reinvest at the current rate or move your funds elsewhere.
3. Balance Risk and Access: Laddering ensures some of your money is available every year in case you need liquidity or want to capitalize on higher rates.

Always align your CD choices with your financial goals and timeline. If you need the funds in four years, for example, avoid locking money into a 10-year CD — even as part of a ladder.

Alternatives to CDs if Rates Stay Low

If interest rates don’t move higher — or if they decrease — consider diversifying into other conservative investments:

• High-Yield Savings Accounts: Often pay variable rates that can rise if the market shifts.
• Treasury Securities: Offer fixed rates and are backed by the U.S. government.
• Money Market Funds: Provide variable returns, which can adjust upward more quickly than fixed-rate CDs.

Balancing fixed-rate products (like CDs or Treasuries) with variable-rate products (like high-yield savings accounts) can position you to benefit whether interest rates rise or fall.

Final Take to GO

Navigating the CD rates forecast can be challenging, especially when the Federal Reserve’s next moves remain uncertain. However, a thoughtful approach, like building a CD ladder or mixing in variable-rate options, can help you earn competitive returns while maintaining flexibility.

Ready to optimize your savings? Compare current CD rates at various banks, consider your financial goals and choose the strategy that best balances stability and potential growth.

Daria Uhlig contributed to the reporting of this article.

The information is accurate as of April 3, 2025.

Editorial Note: This content is not provided by any entity covered in this article. 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 any entity named in this article.

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