CD rates are not rising right now—they're falling

As of late 2024, CD rates have been declining for months. The Federal Reserve stopped raising its benchmark interest rate in mid-2023 and has been cutting it since September 2024. When the Fed's rate drops, banks lower the rates they offer on new CDs within weeks or days. If you locked in a CD at 5% last year, a new CD opened today will pay less—often between 4% and 4.5%, depending on the bank and the CD term.

The direction of CD rates follows the Fed's decisions, not the other way around. The Fed raises rates to fight inflation and lowers them to encourage borrowing and spending during slower economic periods. Your CD rate is set the day you open the account and stays that rate for the entire term—whether rates go up or down after that. So the question is not whether your existing CD will earn more, but whether you should open a new one now or wait.

Key Takeaways

  • CD rates have fallen since the Federal Reserve began cutting its benchmark rate in September 2024, and most banks now offer rates between 4% and 4.5% on new CDs.
  • Your CD rate is locked in on the day you open the account and does not change, even if market rates rise or fall during your term.
  • The Fed's next moves depend on inflation data and economic conditions, which means rate direction remains uncertain beyond the next few months.
  • If you think rates might rise later, you can open a shorter-term CD now and reinvest when rates improve, or split your money across multiple terms.

Why CD rates move when the Federal Reserve acts

Banks set CD rates based on what they can earn by lending your money out, which is tied to the Fed's benchmark rate. When the Fed raises its rate, banks can charge borrowers more, so they can afford to pay you more on a CD. When the Fed cuts its rate, banks earn less from lending, so they cut what they pay you. This happens within days or weeks of a Fed decision, not months later.

The Fed does not set CD rates directly. It sets the federal funds rate, which is the interest rate banks charge each other for overnight loans. That rate influences everything else—mortgage rates, savings account rates, CD rates, credit card rates. A bank offering a 4.5% CD is essentially saying: "We can lend this money out at rates tied to the Fed's benchmark, and we need to keep some profit, so we'll pay you 4.5%."

What happened to rates over the past year

CD rates peaked in late 2023 and early 2024, when the Fed held its benchmark rate at its highest level in over two decades—between 5.25% and 5.5%. Many banks offered CDs at 5% or higher during that window. In September 2024, the Fed began cutting its rate, and by late 2024 it had made several cuts. Banks responded by lowering CD rates across all terms.

If you opened a CD in 2023 at 5%, that rate is still yours until the CD matures. You are not losing money. But if you are deciding whether to open a new CD today, you will see lower rates than you would have seen a year ago. The timing of when you lock in a rate matters, which is why some people watch Fed announcements closely.

How to predict whether rates will rise or fall next

No one can predict the Fed's moves with certainty, but you can watch the same data the Fed watches: inflation reports, employment numbers, and economic growth. The Fed raises rates when inflation is too high and lowers them when the economy is slowing or inflation is under control. You can find these reports on the Federal Reserve's website and major financial news outlets.

The Fed meets eight times a year to decide on rate changes. The dates are published in advance, so you know when announcements are coming. Some people wait until after a Fed meeting to open a CD, hoping to lock in a rate that just changed. Others open a CD immediately after a rate cut, betting that rates have hit bottom. Neither strategy is may provide to work, and trying to time the market often backfires.

Should you open a CD now or wait for rates to rise

If you have money you will not need for a set period—say, six months or two years—a CD at today's rate is better than leaving the money in a checking account earning almost nothing. Even at 4%, a CD beats a 0.01% checking account by a huge margin. The question is not whether to get a CD, but which term makes sense for your situation.

If you think rates might rise significantly in the next few months, you have options. You can open a shorter-term CD now—say, a 3-month or 6-month CD—and then open a longer-term CD later if rates have risen. You can also split your money across multiple terms: put some in a 1-year CD, some in a 2-year CD, and some in a 3-year CD. When the shorter ones mature, you reinvest at whatever rate is available then. This is called a CD ladder, and it lets you take advantage of rate increases without leaving all your money in a low-rate CD.

Where to find current CD rates

CD rates vary by bank, by term length, and by the amount you deposit. A 1-year CD at one bank might pay 4.2%, while a 1-year CD at another pays 4.5%. Online banks usually offer higher rates than brick-and-mortar banks because they have lower overhead costs. You can compare rates on financial websites like Bankrate, DepositAccounts, or the banks' own websites.

When you compare, pay attention to the term length and the minimum deposit. A bank offering 4.8% on a 5-year CD is not the same as one offering 4.8% on a 1-year CD. Also check whether the bank charges a penalty for early withdrawal—most do, and the penalty can eat into your earnings if you need the money before the CD matures. Read the fine print before you open an account.

What to do if you already have a CD at a higher rate

Keep it. Your rate is locked in and will not change. You are earning more than someone who opens a CD today, and that is a win. Do not close it early to chase a different rate—most banks charge an early withdrawal penalty that will cost you more than you would gain by switching.

When your CD matures, you will have a choice: open a new CD at whatever rate is available then, move the money to a savings account, or use it for something else. At that point, rates may be higher, lower, or the same as they are today. Plan ahead so you are not caught off guard when the maturity date arrives.

Frequently Asked Questions

Can I lock in a higher rate before the Fed cuts again?

If you think rates will fall further, locking in today's rate is better than waiting. But if you think rates might rise, waiting could pay off. The problem is that no one knows for certain what the Fed will do next. Most financial advisors suggest opening a CD when you have money to invest and you know how long you can leave it untouched, rather than trying to time rate movements.

What if I need my money before the CD matures?

Most banks charge an early withdrawal penalty, which is a fee taken from your earnings or principal. The penalty varies by bank and by CD term—a 1-year CD might charge three months of interest, while a 5-year CD might charge one year of interest. Check the penalty before you open the CD so you know what it will cost if you need the money early.

Are CD rates the same at every bank?

No. Online banks typically offer higher rates than traditional banks, and rates vary between online banks too. A 1-year CD might pay 4.2% at one bank and 4.5% at another. It is worth comparing rates across several banks before you open an account. The difference between 4.2% and 4.5% adds up over time, especially on larger amounts.

Will rates ever go back up to 5%?

It depends on inflation and economic conditions. If inflation rises significantly, the Fed may raise rates again, and CD rates would follow. If inflation stays low and the economy slows, rates may stay where they are or fall further. The Fed's decisions are based on data, not on a predetermined path, so the direction beyond the next few months is genuinely uncertain.