:max_bytes(150000):strip_icc()/Xmasvisualspace-aaed8f26dfe0455eab8239e492f3a77b.jpg "What Will CD Rates Do in 2024? Clues from Today’s Fed Announcement")
Key takeaways
- For a third consecutive meeting, the Federal Reserve announced today that it is keeping interest rates at current levels. The maintenance of rates was widely expected.
- That Fed meeting also included a quarterly release of the committee’s dot plot, which indicates a median expectation among Fed members that three rate cuts totaling 0.75% will occur by the end of 2024.
- Top CD rates have climbed this year to their highest levels in 20 years, at one point reaching 6.50% APY. But with the Fed holding rates steady — and an end to hikes looking almost certain — banks and credit unions have already begun easing their cap rates.
- So now is the perfect time to lock in one of today’s events. best CDs in the country before rates fall further.
What we learned today from the Fed
As widely expected for weeks, the Federal Reserve announced this afternoon that it maintains the federal funds rate at its current level. This is the third consecutive meeting ending with a hold on rates, after the last increase on July 26.
Since March 2022, the Fed has implemented 11 rate hikes in its fight to bring decades-high inflation under control. His rate hike campaign raised the federal funds rate by a cumulative 5.25%, bringing it to its highest level since 2001.
Like previous announcements, today’s statement says that until the committee is confident that inflation will return to the Fed’s 2% target — and that it will reliably follow stay close to this level – it will keep its options open for further rate increases if necessary.
Federal Reserve Chairman Jerome Powell said: “While participants (on the committee) do not consider it likely appropriate to raise interest rates further, they also do not want to rule out the possibility .”
Yet other data presented today indicates that the rate hikes are most likely over. Every three months, the Fed’s announcement includes a much-anticipated “dot plot“This chart represents each committee member as a dot (unnamed) and uses those dots to show where each member thinks the federal funds rate will be at the end of 2024, 2025, and so on.
In the dot chart released today, we learned that no Fed member is currently predicting another increase in 2024. Additionally, they are now forecasting more rate cuts in 2024 than they had predicted in the September dot chart. The median expectation is now for three rate cuts by the end of 2024, totaling a reduction of 0.75%. Among the 19 committee members, only about 10% expect the federal funds rate to remain stable through 2024, while about 80% expect two to four cuts.
As we always caution, these are just predictions based on what Fed members currently know. The economic landscape can change quickly, meaning the Fed can change course from previous projections. It’s also worth noting that Fed members’ forecasts for rate cuts apply to next year as a whole, with no signals about rate cuts. When in 2024, they expect the first reduction to be implemented.
How the Fed Affects Best CD Rates
THE The Federal Reserve decisions regarding the federal funds rate directly impact the interest that banks and credit unions are willing to pay for savings, money market and certificate of deposit (CD) accounts. When banks and credit unions expect the Fed to raise the federal funds rate, many of them will also raise their consumer deposit rates. The opposite is true when they expect the Fed to cut rates.
Following the Fed’s increase in its key rate of 5.25% since March 2022, the best CD prices have skyrocketed. At one point, the highest rate on a nationally available certificate had reached 6.50% APY, with several certificates on the market in October and November paying over 6.00%. However, rates have since declined from those all-time highs, with a current maximum rate of 5.76% APY.
In a hold-rate situation like the one we’re experiencing now, predicting CD rates becomes a waiting game: monitoring economic indices and comments from Fed members on how long rates will remain at current levels, or give indications of imminent change. drop in rates. The Fed’s next rate announcement will be on January 31, 2024.
Advice for CD Buyers
Based on what we see in today’s dot chart, the chances of another rate hike – and the associated chances of a CD rate increase – have now become quite slim. And in fact, many banks and credit unions have already lowered their rates, with almost all of the CD rate changes we’ve tracked over the past month being downward moves. So it seems almost certain that the peak in CD rates is behind us.
So now is the perfect time to lock down one of the the best CD prices of the moment, because you can still get a historically exceptional return. With dozens of options paying over 5%, you still have plenty of high-paying options. But these rates are expected to decline in the weeks and months to come.
Disclosure of rate collection methodology
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.
Banks must be available in at least 40 states. 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.
