Our experts answer readers' banking questions and write unbiased product reviews (here's how we assess banking products). In some cases, we receive a commission from our partners; however, our opinions are our own. Terms apply to offers listed on this page.
- CD rates have gone up this year as the Federal Reserve has raised rates several times in 2023.
- CD rates are expected to fall in 2024 when the Federal Reserve starts cutting rates.
- If you have money available and a clear purpose for a CD, experts say it's better to get a CD now instead of waiting for potential rate increases.
CD rates vary widely across financial institutions. However, if you've been paying attention to the best CD rates, you've likely noticed that these bank accounts have gotten increasingly more competitive over the last year.
Will CD rates go up in 2024, too? We'll go over why CD rates have gone up this year, what could likely occur in 2024, and how to decide if you should open a CD now or wait.
Why have CD rates gone up in 2023?
CD rates have gone up in 2023 because savings account rates have been impacted by the Federal Reserve's decisions. The Federal Reserve has raised the federal funds rate numerous times in 2023 to combat inflation.
CD rates are influenced by changes in the federal funds rate and can go up and down over time. Here's how it works: When the Federal Reserve raises rates, CD interest rates typically go up. If the Federal Reserve begins cutting rates, CD rates drop.
CD rate forecast for 2024
CD rates will likely begin going down in 2024. However, the exact time when CD rates will fall is speculative. Experts have various predictions on when the Federal Reserve will begin cutting interest rates, which will influence CD rate changes.
Alvin Carlos, CFA, CFP, financial planner, and managing director of District Capital Management, points out that the Federal Reserve wants inflation to go down to 2%.
The Consumer Price Index, a tool for measuring inflation, increased 3.2% year over year in October. Carlos says the Federal Reserve probably won't begin cutting rates until it is closer to the inflation target.
Furthermore, the CME FedWatch Tool analyzes the probability of changes to rate changes at upcoming Federal Open Market Committee meetings. There's over a 40% chance the Federal Reserve could begin cutting rates as soon as May 2024. The CME FedWatch Tool also indicates that multiple rate cuts could occur in 2024.
Should I open a CD now or wait?
There's a chance CD rates could go up a bit higher, but that doesn't necessarily mean you should wait.
Carlos suggests that if you want to save for a specific goal and don't need immediate access to your money, buying a CD now may be more advantageous instead of waiting for potential rate fluctuations. Once you open a CD, the rate will stay the same for the entire duration of the term. Today's CD rates are significantly higher than historical CD rates recorded in the last decade, and locking in a rate now will allow you to grow your savings if it isn't already in an interest-earning account.
Carlos adds that you could build a CD ladder if you want more flexibility. To create a CD ladder, you distribute your money into multiple CDs of different term lengths. If interest rates rise, you'll be able to take advantage of higher CD rates by buying new CDs once your short-term accounts reach maturity.
Furthermore, if CD rates drop, you'll also be protected against interest rate volatility — the money in your long-term account will earn the same interest rate for the entire term until it ends.
CD rate forecast FAQs
What will interest rates be in 2024?
The Federal Reserve may start cutting the federal funds rate around the middle of 2024, according to rate probabilities analyzed by the CME FedWatch Tool. As a result, interest rates for consumer banking products will likely shift accordingly. Mortgage rates will likely go down, as well as the rates of savings accounts.
Will CD rates go down in 2024?
CD rates will likely remain high at the beginning of 2024. When the Federal Reserve begins cutting the federal funds rates, CD rates will go down as well.
What will CD rates be in 2025?
CD rates may also continue to drop in 2025. However, keep in mind that it's difficult to predict what actions the Federal Reserve will take two years from now. Future predictions can change based on the economic environment.
How high are CD rates expected to go in 2023?
The highest CD rate in 2023 occurred earlier this year when Alpena Alcona Area Credit Union offered 7.19% APY on a 7-month CD special. This offer has now ended, and the highest CD rates are paying around 6% APY. There could potentially be higher CD rates later this year, but it will depend on what the Federal Reserve does.
How high will CD rates go in 2024?
While it largely depends on the Federal Reserve's decisions, CD rates in early 2024 are generally expected to be on par with current CD rates. It's likely CD rates will also begin to drop sometime in 2024.