It’s hard to stop wanting more from CD rates. Since early 2022, they’ve been climbing relentlessly, hitting historic highs. In fact, you can earn an eye-popping 6.00% with today’s best nationwide CD.
But will rates keep going higher? Is a 7% CD in our future? It’s an open question whether there is more room to climb. While reaching the 7% mark is probably a bridge too far—barring unexpected events with inflation and the economy—there is the possibility that CD rates could still set more records this year or in 2024.
- CDs are already paying record rates, with a top nationally available rate of 6.00% APY.
- The rise to historic levels is thanks to the Federal Reserve’s aggressive campaign to raise interest rates over the past 19 months in an effort to tame decades-high inflation.
- Market participants expect the Fed to hold its benchmark rate steady when it meets in three weeks, but future increases remain a possibility until inflation is under control.
- Any additional hike by the Fed would certainly nudge CD rates a bit higher. But the expected gains would be incremental—and not likely to push CD rates all the way to 7.00%.
Today’s Best CDs Are Already Paying Record Rates
Back in January 2022, what you could earn by locking your money in a CD was underwhelming. On the short end of terms, the best nationally available 6-month CD was offering 0.80% APY, while you could earn up to 1.50% APY only with a 5-year commitment.
Fast forward to today and those top rates have skyrocketed. You can now earn a minimum of 5.00% APY across all terms, with the majority of the best CDs offering top rates of 5.60% to 6.00% APY. That’s as much as seven times what you could earn at the beginning of 2022, and is estimated to be the highest level for CD rates in more than 20 years.
This remarkable rate run-up is thanks to the Federal Reserve, which has been raising the federal funds rate aggressively since March 2022 in a fight against 40-year-high inflation. The fed funds rate is important to savers because when it rises, the interest rates that banks and credit unions are willing to pay on savings, money market, and certificate of deposit accounts also rise.
The U.S. central bank has hiked rates 11 times in its current campaign, raising the benchmark rate by a total of 5.25 percentage points to a range of 5.25% to 5.50%. That range marks the highest level for the fed funds rate since 2001—which in turn has pushed CD rates to their current highs.
Will CD Rates Climb Even Higher?
For CD rates to go much higher than they are now, the Fed would need to implement another rate hike. Unfortunately for CD shoppers, that’s unlikely at the Fed’s next meeting, which will conclude with an announcement on Nov. 1. Instead, the rate-setting committee is widely expected to maintain its benchmark rate at its current level, giving them more time to analyze additional inflation and employment data.
But the Fed committee will meet one more time in 2023, with its last two-day meeting of the year concluding Dec. 13. Officially, the Fed’s statements after its Sept. 20 meeting made it clear that the possibility of future rate hikes was still on the table, with Fed Chairman Jerome Powell stating in his post-meeting press conference, “We’re prepared to raise rates further if appropriate.”
Other Fed members have echoed the possibility of more hikes if inflation doesn’t come down far enough, or does not seem to be reliably trending downward. More recently, however, several committee members have said that they believe the Fed rate hikes have reached their end.
Predictions of Fed rate moves should always be taken with caution, as the economic landscape can change quickly and alter the central bank’s course at any time. Still, financial markets currently place just 35% odds on a rate hike being implemented at the Fed’s December or January meetings, according to the CME Group’s FedWatch Tool.
This could mean the current level for CD rates is already at its peak. But even if there is another Fed rate hike late this year or in early 2024, it will almost certainly be just a 25 basis point increase. Beyond that timeline, the predictions about rate increases are even less reliable, but none foresee more than two hikes between now and the end of next year, for a total of a 50-basis-point increase. That’s enough to edge CD rates a little bit higher, but not enough to catapult them all the way to 7%.
Rate Collection Methodology Disclosure
Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account’s minimum initial deposit must not exceed $25,000.
Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don’t meet other eligibility criteria (e.g., you don’t live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.