What the October 2026 Fed Rate Decision Means for CDs

The Federal Reserve decided on Oct. 28 to keep the federal funds rate the same. The target range of the Fed rate remains 3.75% to 4.00%. This comes after the Fed increased its rate in Sept., the first rate increase in three years. The range remains higher than it’s been for most of the last two decades

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Board of Governors of the Federal Reserve System. FRED Graph. Accessed Oct 28, 2026. View all sources .

» COMPARE: NerdWallet’s best CD rates

This rate, which is what commercial banks use to borrow and lend money to one another, doesn’t directly raise or lower rates on certificates of deposit, but it can affect them indirectly. When there’s a Fed rate increase, such as after the Fed’s Sept. 2026 meeting, you might see higher CD rates.

Here’s a closer look at how it works.

Certificates of deposit reached 5% APY in October

The most competitive rates on CDs are now firmly for long terms, such as four and five years, and two banks started offering 5% on their five-year CDs in Oct. 2026, according to a NerdWallet analysis. Other terms have also climbed considerably to mid-4% and higher. Longer terms traditionally have higher rates, but this hadn’t been the case from November 2022 to mid-2026.

CD rates remain higher than they’ve been for most of the past decade. The highest rates, regardless of the rate environment, tend to be at online banks and credit unions.

» LEARN MORE: CD rate forecast: Are CD rates going up in 2026?

Fed rate increases can mean higher CD rates

As the U.S. central bank, the Federal Reserve tries to keep the economy steady using an important rate it can influence: the federal funds rate. This is roughly the cost of borrowing cash overnight between banks. Typically the Fed lowers its rate to help stimulate the economy and raises it to help curb inflation

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Board of Governors of the Federal Reserve System. Policy Tools: Open Market Operations. Accessed Oct 28, 2026. View all sources .

» Learn more: What Fed rate hikes mean for savings accounts

Banks generally follow the direction of the Fed funds rate in setting their rates on loans and savings accounts, including newly issued CDs. So a lower Fed rate can result in lower CD rates, but it may not happen instantly. And CD rates may rise when the Fed rate does

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Federal Reserve Bank of St. Louis. FRED Graph. Accessed Oct 28, 2026. View all sources .

Locking in high CD rates while they're available might make sense if you’ve been eyeing CDs and they align with your savings goals.

Are CD interest rates rising?

The short answer is yes, but it’s unclear how long this trend will last. Economic uncertainty and rising inflation in mid-2026 shifted the direction from a falling to a rising rate environment. The Sept. Fed rate increase was the first in three years, but CD rates had been rising since May 2026.

How different types of CD rates respond to Fed rate changes

• The most competitive rates change often and respond the most to Fed rate hikes. Online banks and credit unions, which have some of the highest CD rates, will likely continue raising rates as a response to Fed rate hikes.

• More modest rate changes occur across the banking industry. National average CD rates for one- to five-year terms move more slowly than high-yield rates.

• Some rates barely budge in general. Standard CD rates at some of the largest U.S. banks have barely moved for years, regardless of Fed rate changes.

Note: CD rate changes impact only new CDs available at banks and credit unions, not existing CDs you have. Step-up and bump-up CDs, which are discussed more below, are the two exceptions.

» Learn more: Historical CD rates

Savings accounts vs. CDs

A Fed rate drop can lead to lower rates for regular savings accounts and CDs — and a Fed rate increase pushes rates up. But the differences between these accounts can impact which to use and when.

A regular savings account usually has a variable rate, meaning it can change. Your money may earn more interest when the rate rises and less interest when the rate drops. Since you can add or withdraw money over time, this account provides a flexible way to build up savings. See the latest high-yield savings account rates.

A CD generally has a fixed rate. When you open a CD, you lock up an upfront sum of money at one interest rate for a term usually ranging from three months to five years. CD rates tend to be higher than regular savings account rates, but in exchange, you lose access to money in a CD until the term ends unless you pay a penalty to withdraw early.

CDs can be good for setting aside a sum earmarked for a large future purchase, such as a car or house, or simply as a low-risk place for some savings you’ll need years from now. Learn more about when CDs are worth it.

Why would my bank change CD rates but not mine?

A bank generally changes rates on newly issued CDs over time, but CDs that customers already opened don’t have rate changes. The main exceptions are step-up and bump-up CDs, which are structured for potential rate increases during a term. Bump-up CDs only allow such increases if newly issued CDs of the same term and at the same bank go up.

How to find high CD rates

1. Check out CDs at online banks or credit unions.

Every bank sets its CD rates, but only some have high-yield CDs. Online-only institutions can afford to offer higher rates than brick-and-mortar banks since they don’t have the costs associated with managing a branch network. See the best CD rates.

2. Consider longer CD terms or a CD ladder.

The standard trend is the longer the CD term, the higher the rate. Longer can mean four- to five-year CDs compared to six-month to one-year CDs. Bear in mind, though, another trend: The longer the term, the higher the penalty for an early withdrawal. The penalty is usually interest earned over a number of days or months, or even years.

If you want both ongoing access to some money in CDs and high rates, you might opt for a CD ladder. This involves opening multiple CDs with staggered end dates, allowing you to choose to reinvest or withdraw funds after each CD matures. Learn more about CD ladders.

Keep an eye on CD rates

CDs can be a great way to set aside some savings for a near-future goal. In this rising-rate environment, it's a good idea to monitor your bank or credit union’s response and compare it with those of other banks and credit unions. You might hold out for higher rates, but don’t wait too long.

Other ways to save

As you factor CDs into your savings strategies, consider looking into high savings account rates as well as bank bonuses, which can be for checking or savings accounts. If you want a broader overview of account options, here's a guide to multiple ways to earn more interest.