CD rates move with the Federal Reserve's decisions, not in a fixed direction

CD rates do not follow a single trend upward or downward. Instead, they rise and fall based on what the Federal Reserve does with its benchmark interest rate. When the Fed raises rates, banks typically raise CD rates within weeks. When the Fed cuts rates, CD rates fall. The Fed makes these moves based on inflation, employment, and economic conditions—not on a schedule you can predict months ahead.

Right now, CD rates are higher than they were in 2020 and 2021, when the Fed held rates near zero. Whether they go up or down from today depends on what the Fed decides at its next meeting and the meetings after that. No bank or website can tell you what that will be.

Key Takeaways

  • CD rates follow the Federal Reserve's benchmark rate, which changes several times a year based on economic conditions.
  • When the Fed raises its rate, banks raise CD rates within one to three weeks; when the Fed cuts, CD rates fall.
  • You can see the Fed's upcoming meeting dates on its official calendar, but the direction of rate changes is not predictable.
  • If you lock in a CD today, your rate stays the same for the full term, regardless of what happens to rates later.

How the Federal Reserve controls CD rates

The Federal Reserve sets a target range for the federal funds rate—the rate banks charge each other for overnight loans. This is not a rate you see directly, but it is the lever that moves everything else. When the Fed raises this rate, banks raise the rates they offer on savings accounts, money market accounts, and CDs. When the Fed cuts the rate, banks cut what they offer you.

Banks do not have to match the Fed's moves exactly or immediately. Some banks raise CD rates faster than others, and some cut them faster too. But over a few weeks, the direction is always the same: Fed up, CD rates up. Fed down, CD rates down.

Why CD rates changed over the past few years

From 2020 through early 2022, the Fed kept its rate near zero because the economy was recovering from the pandemic. CD rates during that time were very low—often below 0.5 percent. In March 2022, the Fed began raising rates aggressively to fight inflation. By the end of 2023, the Fed had raised its rate to between 5.25 and 5.5 percent, and CD rates climbed to match. A one-year CD that paid 0.05 percent in early 2022 might have paid 4.5 to 5.5 percent by late 2023.

In 2024, the Fed began cutting rates, and CD rates started falling in response. The exact timing and size of future cuts depend on inflation data and employment reports that come out monthly. This is why CD rates change, sometimes noticeably, even when you are not paying attention.

When the Fed meets and how to track upcoming decisions

The Federal Reserve holds eight regularly scheduled meetings per year, roughly every six weeks. You can see the full calendar on the Federal Reserve's official website. At each meeting, the Fed's policy committee votes on whether to raise, lower, or hold steady the federal funds rate.

The Fed announces its decision at 2 p.m. Eastern time on the day of the meeting. Banks and financial websites react within minutes, and CD rates often shift within a few hours to a few days. If you are watching CD rates closely and a Fed meeting is coming up, expect possible movement shortly after the announcement.

What locking in a CD rate means for you

When you open a CD, you agree to leave your money in the account for a set time—three months, six months, one year, five years, or another term. In exchange, the bank guarantees a fixed interest rate for that entire period. If you open a one-year CD at 4.5 percent today and the Fed cuts rates next month, your CD still earns 4.5 percent for the full year.

This is the main reason people open CDs when rates are high: they lock in that rate before it falls. If rates are falling and you think they will keep falling, a CD protects you from earning less later. If rates are rising and you think they will keep rising, a CD locks you in at today's rate, which might be lower than what you could get in a few months.

How to decide whether to open a CD now or wait

You cannot know whether rates will go up or down, so the decision comes down to your own situation. If you have money you will not need for the next year or more, and you want a may provide return, a CD at today's rate is a reasonable choice. You get certainty: no matter what happens to rates, you know exactly what you will earn.

If you think rates might go higher and you can afford to wait, you could hold off. But waiting means taking the risk that rates fall instead, and you miss the current rate. There is no perfect answer. The trade-off is between locking in today's rate and keeping the option to move your money if rates rise.

One middle ground is a CD ladder: open several CDs with different maturity dates. When the first one matures in a few months, you can open a new one at whatever rate is available then. This spreads your risk across multiple rate environments instead of betting everything on one timing decision.

Where to find current CD rates

CD rates vary by bank and by term length. A six-month CD at one bank might pay 4.2 percent while another pays 3.8 percent. Online banks typically offer higher rates than brick-and-mortar banks because they have lower overhead costs. You can compare rates on financial websites that track them daily, or you can call banks directly and ask what they are offering today.

Rates change frequently, so a rate you see quoted on a website might be different by the time you call the bank. Always confirm the current rate with the bank before you commit. Also check whether the bank requires a minimum deposit—some require $500, others $10,000 or more.

Frequently Asked Questions

Will CD rates go up or down in the next three months?

No one can predict the Fed's moves with certainty. The Fed's next meeting date is public, but whether it will raise, cut, or hold rates depends on economic data released between now and then. Financial news outlets publish predictions, but they are educated guesses, not facts.

Should I open a CD now or wait for rates to drop?

If you need a may provide return and will not need the money during the CD term, opening one now locks in today's rate. If you believe rates will rise and you can wait, holding off might pay off—but you risk rates falling instead. There is no risk-free choice.

What happens to my CD if the Fed cuts rates after I open it?

Your CD rate does not change. You earn the same rate for the entire term, no matter what the Fed does. This is the may provide the bank makes when you open the account.

Can I move my money out of a CD early if rates go up?

You can, but most banks charge an early withdrawal penalty—usually a few months of interest. Read the CD's terms before you open it to see what the penalty is. Some banks offer no-penalty CDs, though they typically pay lower rates.

How quickly do banks change CD rates after the Fed moves?

Most banks adjust CD rates within one to three weeks of a Fed decision. Online banks often move faster than traditional banks. Rates can shift multiple times in a single week if economic news changes expectations about what the Fed will do next.