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 are falling in 2024. Both national average and high-yield CD rates have been noticeably dropping, especially during the second half of 2024, which is when the Federal Reserve began lowering its federal funds rate.

Here’s a quick comparison: From late January to late August 2024, the midpoint for one-year CD rates at 21 online banks and credit unions dropped from 5.10% to 4.70% annual percentage yield, according to a NerdWallet analysis. In late October, the midpoint for one-year CD rates fell to 4.10%, a whole percentage point lower than January’s midpoint. Because rates may continue to fall, 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 Fed increased its federal funds rate in 2022 and 2023. 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. From March 2022 to July 2023, the Fed raised its rate 11 times. After a year of no rate changes, the Fed finally lowered its rate after the September and November 2024 meetings^[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 about what Fed rate decisions mean for CDs and savings accounts.

» Learn more: What happens when the Fed finally cuts rates?

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 1.84% for one-year CDs and 1.35% for five-year CDs. Top one-year yields are around 4.30%, and the best five-year CD rates are closer to 3.50%.

• 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 lowered its rate by one-quarter percentage point to a rate range of 4.50% to 4.75% after its seventh meeting of 2024 on Nov. 6-7. Projections suggest that the Fed will continue to drop its rate for the next few years, and it’s unlikely that we’ll see any rate increases. The next Fed rate cut may occur in December, according to CME FedWatch (accessed on Nov. 5, 2024). When 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]

CD rate 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 September economic projections^[0]

“Now that the Fed is committed to cutting the federal funds rate, we’re seeing short-term rates sliding. These short-term rates should move down closely with Fed cuts, likely half a percentage point this year, but as much as a full percentage point,” Robert Frick, corporate economist at Navy Federal Credit Union, said in a Sept 13 email.

“Longer-term rates are tougher to predict,” said Frick. Given how long-term CDs yields are down, he noted that “savers need to act fast to lock in longer rates around 4%. As always, the best strategy remains laddering CD lengths, so you may not get the best rate on an individual CD, but you’re guaranteed to get a good rate overall.”

2024 data highlight: bigger drops for high-yield CDs

CD rates at nearly two dozen online banks and credit unions continued to drop more steadily in October than the first half of the year. For the median APYs of four popular CD terms, both short- and long-term yields fell. The biggest change was for one-year CDs at 100 basis points (one percentage point).

In contrast, rate drops from January through July were 20 basis points at most. 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, know that some types of CDs offer flexibility. Bump-up CDs allow you to increase the rate at least once during a CD term if new CD rates go up. But in a falling-rate environment, it’s more likely for bump-up CD rates to stay the same. 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 4% APY. Or, if you’re looking to invest, consider more ways to invest your savings.