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CD Rate Expectations: What Savers Should Know

Sarah Sharkey Updated: September 26, 2023 • 3 min read
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Key Points:

  • The Fed announced that it would not change interest rates immediately.

  • Holding interest rates steady is a change from the relentless push to raise rates, beginning in March 2022.

  • Information released from the Fed indicates that many committee members think interest rates will need to rise at least one more time this year.

The Federal Reserve recently announced that it would not increase the target federal funds rate immediately. While the announcement of holding steady was generally expected, this confirmation gives us some insight into what might happen with interest rates for CDs and savings accounts for the rest of 2023 and into 2024.

How the Federal Reserve Impacts CD Rates

Before we take a closer look at the information provided by the Fed’s decision, it’s helpful to understand why it matters for CD rates. When the Federal Reserve chooses to raise the federal funds rate, the interest rates offered by banks and lenders also rise. In contrast, a falling federal funds rate comes with lower rates on savings products, like CDs.

12 out of the 19 committee members believe that the federal funds rate will need to rise once more in 2023.

Generally, the market had prepared for the Fed's decision to keep interest rates steady earlier this week. Although people anticipated this move, it represents a significant shift from the continuous rate hikes that began in March 2022. The total of 11 rate hikes in the last 13 meetings has led to a current federal funds rate target of 5.25% to 5.50%.

What the Fed’s Expectations Mean for Future CD Rates

The Fed’s choice to keep CD rates steady means that CD rates should remain relatively stable for the immediate future. But in addition to holding rates steady, the Fed also released a report that included a ‘dot plot.’ The plot includes where each committee member thinks that the federal funds rate will be by the end of 2023, 2024, 2025, 2026, and beyond.

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Based on this information, 12 out of the 19 committee members believe that the federal funds rate will need to rise once more in 2023. That’s a majority of the committee members. If they are correct, we should see a boost in interest rates in either November or December. In terms of CD rates, a boost to the federal funds rate later this year should come with higher CD rates.

After 2023, 13 out of 19 committee members believe the federal funds rate will need to be lowered by the end of 2024. If the federal funds rate is lowered, CD rates will likely fall too.

What This Means for Savers

As a saver, rising interest rates make it easier to put your funds to work for you. Whether you opt for a high-yield savings account or CD to store your funds, a rising rate environment means your funds can earn more in interest payments.

CDs Related Articles

CD shoppers can generally expect to enjoy relatively high rates for the rest of 2023, and perhaps into 2024. But if the Fed lowers interest rates in 2024, it’s likely that CD rates will fall quickly. It’s possible that CD rates will start to fall before the Fed actually makes the decision to lower rates, if it looks likely that a decrease to the federal funds rate is in the works.

It’s possible that CD rates could climb a notch higher. But if you want to lock in relatively high rates, it might be smart to act sooner rather than later.

Of course, all of this advice is based on what we currently know. If something major and unexpected happens in the economy, then the Fed’s projections may change dramatically.

The Bottom Line

Savers who want to tap into high CD rates should consider locking in a great rate now. While CD rates might rise slightly higher in the coming months, any indication of a decrease in the federal funds rate will likely lead to a sharp drop in rates.

If you want help shopping around for the top CD rates available, scope out your options today.

Written by Sarah Sharkey linkedin-icon

Sarah Sharkey is a personal finance writer with a Master's in Management from the Hough School of Business at the University of Florida. She enjoys helping people make better financial decisions and has written for numerous personal finance publications, including Money Under 30, Business Insider, and The College Investor. Sarah enjoys traveling, hiking, and reading when she is not writing.