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Why you should consider a CD that guarantees its price until 2025 or beyond

When interest rates are high but falling, certificates of deposit (CDs) are one of the smartest places to put some of your savings. This is because the Annual Percentage Yield (APY) at which you sign up is the rate you’ll keep, even if interest rates on savings accounts and new CDs drop.

This is the situation in which American savers currently find themselves. Triggered by an aggressive rate hike campaign between 2022 and 2023 by the Federal ReserveCD rates climbed last fall to their highest levels in more than 20 years — and they’re still paying historically high rates. But the days of 5% CDs are probably numbered.

The reason is that the Fed has decided to cut rates now that inflation has cooled. The central bank kicked off this new phase with a 0.50 percentage point rate cut on September 18, and is expected to slow further at its meeting next week, which will end with an announcement of a decision on rate on November 7.

The best CDs pay 5% or better for up to a year, but longer-term guarantees may be smarter

Although CD rates have already fallen from their peak over the past two decades, you can still benefit from attractive rates. For example, the dozen or so CD options available nationally yield 5.00% or more. The best paid offers 5.50% APYavailable with a duration of 8 months. Or you can earn a maximum rate of 5.00%, i.e. locked up for a year. These two conditions will guarantee the rate of your CD until 2025.

But opting for a longer CD term, with a lower APY, might be a better solution. If you can do without some of your savings for 18 months or more, you can extend one of today’s great rates even longer. You could score a maximum rate of 4.65% for 15 months, while the The first 2-year CD yields 4.50%. This 24-month rate lock will allow you to obtain a guaranteed return until Halloween 2026.

It is also wise to consider longer rate locks. You can benefit from a maximum rate of 4.00% to 4.25% on certificates guaranteeing their rate until 2027, 2028, or even the end of 2029.

Don’t Delay: Multiple Fed Rate Cuts Will Likely Continue to Depress Savings and CD Rates

Another quarter percentage point rate cut appears likely next week, with more than 95% of interest rate traders currently betting on the announcement, according to CME Group’s FedWatch tool. But it is unlikely to stop there. Nearly three-quarters of these investors expect a quarter-point cut at the Dec. 18 meeting.

The Fed also plans to cut rates further in 2025 and likely in 2026, as shown by its “dot plot“The quarterly chart, last published on September 18, anonymously indicates what each member of the Fed committee expects to happen at the federal funds rate over the next few years. As you can see below, their median forecast calls for rate cuts totaling half a percentage point in the final two meetings of 2024, another percentage point reduction in 2025, and possibly another half percentage point reduction -point in 2026.

Time will tell what happens to the federal funds rate this year and beyond. But it’s reasonably certain that the rates you can secure today are much better than what we’re likely to see in the coming months. So, locking your favorite CD soon remains a smart and forward-thinking decision.

How We Find the Best Savings and CD Rates

Every business day, Investopedia tracks rate data from more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines the daily rankings of the highest-paying accounts. To be eligible for our lists, the establishment must be federally insured (FDIC for banks, NCUA for credit unions), and the minimum initial account deposit must not exceed $25,000. It also cannot specify a maximum deposit amount less than $5,000.

Banks must be available in at least 40 states to be considered nationally available. And while some credit unions require you to make a donation to a specific charity or association to become a member if you don’t meet other eligibility criteria (for example, you don’t live within a certain region or do not work a certain type of job), we exclude credit unions with a required donation of $40 or more. To learn more about how we choose the best rates, read our full methodology.