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High CD rates made 2023 a great year to be a saver, but will they remain elevated in 2024? Find out if CD rates have peaked here.
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The years 2022 and 2023 saw one of the most stunning rises in short-term CD rates in over a generation. When 2022 started, the national yield for a 90-day CD was about 0.22%, according to historical data from the Organization for Economic Co-operation and Development (OECD). By November of 2023 — the last time the OECD took data — that 90-day rate had shot up to 5.41%, an increase of about 2,360%.
But just as quickly as they came, so, too, today’s high CD rates may be going out the door. While it’s still too early to make any predictions, there are some indications that CD rates have already headed south for the winter. Let’s take a look at what we know.
OECD data suggests that CD rates peaked in September
The OECD data cited above is one clue that sky-high rates on certificates of deposit may have already passed their denouement. While CD rates are still higher year over year, it appears as if 90-day CDs hit a high in September and began to drop thereafter.
The drop from September to November is small but not insignificant. Since many Fed policymakers are confident they will cut the federal funds rate — which indirectly sets CD rates — at least three times in 2024, it only makes sense that banks would respond by slowly lowering rates in anticipation of those cuts.
That doesn’t mean that you can’t still find lucrative deals on new CDs. In fact, one look at the top-yielding CDs on Raisin shows that rates are still above 5%. What it does mean, however, is that you’ll likely see fewer and fewer truly mind-boggling offers, like 6% to 7% APY. It also means that banks and credit unions may start offering lower APYs on longer terms, like those 12 to 18 months and longer.
Is now the right time to get a CD?
Fortunately, you have time to make a reasonable decision.
Unlike stocks, CD rates don’t fluctuate by the second. They generally follow trends in the Federal Reserve’s federal funds rate, which is still in a target range of 5.25% to 5.50%, the highest it’s been in over a generation. So, while it looks as if 3-month CD rates are falling, you don’t have to rush Black Friday style to the doors of your nearest bank and cram all your money into a new account.
That said, now would be the optimal time to lock into high APYs on long-term CDs, like those 12 months and longer. Since rates are likely going to fall in 2024, these longer terms would help you earn at today’s rates for longer periods.
At the end of the day, your decision to open a CD should be based on your financial goals, not whether CD rates are peaking. If you’ve assessed the risks of CDs — like early withdrawal penalties — and you’re sure it’s a good place for your money, now would be a good time to get one. Take a look at some of today’s top-paying CDs and consider building a CD ladder if you’d like to extend high rates beyond 2024.
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