The Federal Reserve is expected to cut interest rates at its upcoming meeting, leading to a decrease in Annual Percentage Yields (APYs) for certificates of deposit (CDs). Opening a CD now can allow individuals to secure higher interest rates before they fall further. Some of the best CDs currently offer up to 5.25% APY, which is more than double the national average for certain terms. However, time is running out to take advantage of these high rates.
Experts predict that the Fed will start reducing rates at the upcoming Federal Open Market Committee meeting. While the Fed’s decision does not directly impact rates, most banks adjust their rates based on the direction of the federal funds rate range. Therefore, if the Fed cuts rates, banks are likely to follow suit. This means that CD rates are expected to decrease after the Fed’s meeting, so it is advisable not to wait if you plan on locking your money into a CD.
To find the best APY for a CD account, experts recommend comparing rates before opening an account. Some of the highest CD rates currently available include CommunityWide Federal Credit Union offering 5.25% for a 6-month term, CommunityWide Federal Credit Union and Limelight Bank offering 5.00% for a 1-year term, CommunityWide Federal Credit Union offering 4.30% for a 3-year term, and BMO Alto offering 4.10% for a 5-year term. These rates are based on the banks tracked by CNET as of September 13, 2024.
While the Federal Reserve does not directly determine CD rates, its actions influence the market. The Fed adjusts the federal funds rate to stabilize the economy, which in turn affects how much it costs banks to borrow and lend money. When the Fed raises rates, banks tend to raise APYs on consumer products like CDs. In anticipation of a Fed rate cut, banks have been lowering APYs across CD terms. With inflation nearing the Fed’s 2% target and expectations of a rate cut, APYs are likely to continue declining.
When choosing a CD, it is important to consider factors such as competitive APY rates, withdrawal penalties, minimum deposit requirements, fees, federal deposit insurance, and customer ratings and reviews. Evaluating these aspects can help you find the right CD account that best fits your financial goals. CNET reviews CD rates based on the latest APY information from issuer websites, evaluating more than 50 banks, credit unions, and financial companies based on APY, product offerings, accessibility, and customer service. Current banks included in CNET’s weekly CD averages include Alliant Credit Union, Ally Bank, American Express National Bank, Barclays, and many others.
