CD Rate Forecast: Are CD Rates Going Up in 2024?

Interest rates on certificates of deposit play an important role for some savers. CDs’ fixed rates can offer guaranteed returns for several months or years, and locking in a high CD rate can mean earning strong yields even if the economy enters a low-rate environment. Here’s an overview of where CD rates might be headed.

» COMPARE: NerdWallet’s best CD rates

Are CD rates going up?

No, CD rates have started incrementally dropping in 2024. Both national average and high-yield CD rates saw a slowdown in increases last year and that slow pace has remained even as yields start to dip. Here’s a quick comparison: From late January to late May 2024, the midpoint for one-year CD rates at 21 online banks and credit unions dropped from 5.10% to 5.00% annual percentage yield, according to a NerdWallet analysis. While not drastic, more rate drops may be coming. Now’s the time to take advantage of current high-yield CDs, which still have some of the highest rates in more than a decade.

» Skip down to see more on 2024 CD rate changes

A big reason why rates are at such highs is the frequency with which the Federal Reserve increased its federal funds rate. The Fed pushed up the target range of this Fed rate, which is the interest rate banks use to borrow money from each other, as one tool to curb inflation. Since March 2022, the Fed raised its rate 11 times, with more increases in 2022 than in 2023. The last increase occurred after the Fed’s July 25-26, 2023, meeting. In its meetings since then, the Fed has kept rates steady^[0]

Banks generally adjust their rates on new CDs in the same direction as Fed rate changes. Credit unions — the not-for-profit equivalent to banks — similarly raise rates on their CDs, known as share certificates.

» Learn more: What the Fed rate increase means for savings accounts

CD rate trends

• High-yield CDs tend to be at online banks and online credit unions, which have rates that are whole percentages higher than national average CD rates. For example, the national averages are 1.85% for one-year CDs and 1.43% for five-year CDs. Top one-year yields are around 5%, and the best five-year CD rates are closer to 4%.

• Short-term CD rates remain higher than long-term rates, for national averages and among high-yield CDs, according to a NerdWallet analysis. This phenomenon, known as an inverted yield curve, can reflect that banks expect that future interest rates are headed downward.

CD rate forecast: 2024

The Fed kept its rate the same after its fourth meeting of 2024 on June 11-12. Projections suggest that we may see no rate increases in 2024, and that the Fed might start dropping its rate later this year, according to the CME FedWatch Tool on June 11. If the Fed rate drops, CD rates will likely follow suit, though it’s up to each bank and credit union if and when that occurs.

The Fed’s fight against inflation is currently “progressing along a soft-landing path” instead of a recession, and inflation may drop close to the 2% target by the end of 2025, according to a March forecast from the American Bankers Association’s Economic Advisory Committee. The committee consists of chief economists from some of the largest U.S. banks^[0]

When the Fed rate drops, CD rates will likely drop too. But the drops might not be as drastic as they were after March 2020, when the Fed cut its rate to nearly zero. The Fed rate may drop more gradually over the next few years, according to the Fed’s March economic projections^[0]

"Given the Fed still seems hesitant about reducing rates, we shouldn’t expect CD rates to fall significantly, but rather they should fall gradually in step with Fed rate cuts,” Robert Frick, corporate economist at Navy Federal Credit Union, said in an email.

“One or two cuts this year mean a reduction in short-term CD yields by 0.25 percentage points to 0.5 percentage points. Longer-term rates are tougher to predict, but given the Fed is still looking to keep rates higher for longer, long-term rates are likely to remain elevated. The safest strategy remains laddering CD lengths,” said Frick.

2024 data highlight: minor drops for high-yield CDs so far

There’s been a slow decrease of 20 basis points (0.20 percentage point) or less in the median APYs for high-yield CDs at nearly two dozen online banks and credit unions from late January to late May this year. Shorter-term rates generally remain higher than longer-term rates.

Take advantage of today’s CD rates

Lock in CD rates sooner than later. CDs are typically best for specific goals, such as protecting some savings from inflation’s effects or earmarking a fixed sum for a large purchase within five years, such as a car or house.

Remember specialty CDs. If you’re unsure about getting a CD now, some types of CDs offer flexibility. Bump-up CDs allow you to increase the rate at least once during a CD term, as long as rates on new CDs go up. No-penalty CDs give you a fixed rate plus the opportunity to jump ship for free.

Consider a CD ladder to hedge your bets. A CD ladder strategy reduces the stress around timing your CDs. Split up an investment equally into several CDs of different term lengths, such as one year, two years and three years. When each CD matures, reinvest in a longer-term CD or, if you need the cash, withdraw. Ideally, though, you can have multiple long-term CDs that mature at staggered intervals. You mix short-term CD access with long-term rates.

Compare other short-term ways to save and invest. For more everyday savings with the same low risks as CDs, consider a high-yield savings account or money market account, which have top rates above 5% APY. Or, if you’re looking to invest, consider more ways to invest your savings.