Will the best CD rates return to 6%?

Key findings

For much of June and July, CD buyers were able to secure a national top rate of 6.00% per annum. But that great deal is now gone.
The best CD rate currently is 5.40% and is available for 5 months, but you can lock in a return of 5.00% or more on terms of up to 3 years.
The recent decline in CD rates is due to expected cuts in the federal funds rate that the Federal Reserve is expected to implement as early as next month.
In addition, the Fed is likely to further cut its benchmark interest rate in 2024 and 2025, which would lead to a long downward trend in CD rates.
While that means another 6% CD is very unlikely, getting one of today’s best nationwide CDs is still a smart move because you’re locking in your interest rate for the next few months or years.

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What you can earn with today’s best CDs

Thanks to the Federal Reserve’s aggressive rate-hiking campaign, certificate of deposit (CD) rates have enjoyed a remarkable run up over the past year. For a few days last fall, the top CD rate reached a staggering high of 6.50%. And at other times — including most of June and all of July — you could earn 6.00% on the top nationwide offering.

Unfortunately, those days are almost certainly over, as the last CD offering at 6.00% expires on July 31. But that doesn’t mean CDs aren’t still a good idea. With interest rates above 5% that you can lock in for up to three years—or rates in the 4% range that are guaranteed through 2028 or 2029—opening one of the highest-paying CDs currently available is a smart financial move.

But the sooner you decide on one of the best certificates currently available, the better. Below we explain that if you wait, the guaranteed interest rates are unlikely to improve, but in fact will get worse.

Why CD prices have already started to fall

Last month, the US Federal Reserve announced its eighth consecutive interest rate hold after the benchmark rate reached its highest level since 2001 during its historic 2022-2023 rate hike campaign. The central bank’s massive increases in the key interest rate – which influences what banks and credit unions are willing to pay for deposits – were aimed at curbing inflation, which has been high for decades.

But as inflation eased, the Fed was able to take its foot off the interest rate pedal and keep interest rates elevated over the past year. Now inflation has fallen even further, and the Fed must decide when—and how quickly—to hit the brakes.

The Fed’s next interest rate meeting will end with a rate announcement on September 18. The central bank is widely expected to cut rates, but the magnitude of the cut is controversial. According to the CME Group’s FedWatch tool, Fed Funds Futures traders are currently divided in their predictions about the size of the rate cut, with about 55% predicting 0.50 percentage points. The rest predict a rate cut of 0.25 points.

Since confidence in this Fed rate cut is exceptionally high, some banks and credit unions have already started cutting rates. This is because CDs not only offer you a today’s interest rate, but a guaranteed Future Interest rate. With Fed rate cuts almost certain in the near future, institutions don’t want to be forced to pay CD rates they will regret months or years later. That gives them little reason to wait for an official announcement from the Fed.

The Fed’s actions are never completely predictable

While no one expects the Fed to keep rates steady in September, it’s important to remember that the Fed’s next meeting is still five weeks away, and more inflation reports will be released during that time. Since new data can always influence the Fed’s interest rate decisions, nothing is certain yet.

Expect CD rates to continue to decline

Unfortunately, for CD buyers, the rate declines we’ve already seen are most likely just the beginning. In fact, this could be the start of a CD rate decline that lasts for the next two to three years. With the fed funds rate at such high levels and inflation now much closer to the Fed’s 2% target, the Fed has plenty of room to lower rates to more normal levels.

In fact, after its June 12 meeting, the Fed released its quarterly “dot plot” forecasts of where the fed funds rate will go in late 2024, 2025, and 2026. As you can see below, at the time of the June meeting, Fed committee members were forecasting a more than 2 percentage point cut in the fed funds rate over the next two and a half years.

An updated Fed dot plot will not be available until September 18. But in the financial markets, about 70 percent of investors currently expect the key interest rate to be at least 0.75 percentage points lower than today by the end of the Fed meeting on November 7. And by the meeting on December 18, more than 80 percent of traders are betting that the key interest rate will have been lowered by at least a full percentage point.

That means there will be little relief for CD buyers. National top rates are likely to continue to fall as long as the Fed holds out the prospect of further rate cuts.

The best advice for CD buyers? Act now!

If you can leave some of your savings sitting around for a while, there’s no better time than now to put some of your money in a CD. Not only will future CD interest rates almost certainly be much lower, but interest rates on high-yield savings accounts will also drop. That means the only way to get one of today’s great rates next year, or in 2025 — or even later — is to lock it in with a CD. Now-before it’s too late.

Daily rankings of the best CDs and savings accounts

How we find the best savings and CD interest rates

Each business day, Investopedia tracks interest rate data from more than 200 banks and credit unions that offer CDs and savings accounts to their customers nationwide and ranks the accounts with the highest interest rates daily. To be eligible for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions) and the account’s minimum deposit cannot exceed $25,000. There also cannot be maximum Deposit amount under $5,000.

Banks must be available in at least 40 states to be considered nationwide. 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 (for example, if you don’t live in a certain area or work in a certain type of job), we exclude credit unions whose donation requirement is $40 or more. For more information on how we choose the best rates, see our full methodology.