CD Rate Trend Week of September 19: Rates Mixed

cd term Last week’s top national rate This week’s top national rates Change
3 months 2.15% APY 2.15% APY no change
6 months 4.00% APY 3.55% APY down 0.45%
1 year 3.21% APY 3.50% APY up 0.29%
18 months 3.75% APY 4.00% APY up 0.25%
2 years 3.59% APY 3.60% APY 0.01% up
3 years 3.55% APY 3.55% APY no change
4 years 3.85% APY 3.85% APY no change
5 years 3.75% APY 3.65% APY below 0.10%

On July 27, the Federal Reserve raised the federal funds rate for the fourth time this calendar year. It was the second time in a row the Fed raised rates this spring by an unusually large three-quarters of a percentage point, on top of two previous increases. As a result, CD rates have increased dramatically since March, and they are likely to continue rising in the coming year.

CD rates have not only climbed since the end of 2021, they have multiplied, with many of this week’s top CD rates sitting at more than triple what the best certificates were paying just six months ago. For example, take a 3-year CD. The highest rate on 3-year CDs available nationally was 1.11% at the end of December. Today, the highest paying 36-month certificate has a rate of 3.55%.


Note that the “top rates” quoted here are the highest rates available nationally, Investopedia has identified in its daily rate research on hundreds of banks and credit unions. This differs greatly from the national average, which includes all banks offering CDs with that duration, including many large banks that pay less in interest. Thus, the national average is always quite low, while the top rates you can find by shopping are often 10 to 15 times higher.

Federal Reserve and CD Rates

Every six to eight weeks, the Federal Reserve’s rate setting committee meets for two days. One of the primary results of eight gatherings over the year is the Fed’s announcement on whether they are moving forward. federal funds rate up, down, or unchanged.

The federal funds rate does not directly determine what banks will pay customers for CD deposits. Instead, the federal funds rate is simply the rate that banks pay each other when they borrow or lend their excess reserves to each other overnight. However, when the federal funds rate is slightly higher than zero, it provides an incentive for banks to view consumers as a potentially cheap source of deposits, which they can then access through savings, money markets, and money markets. CD Rates,

At the start of the pandemic, the Fed announced emergency rate cut Up to 0% as a way to help protect the economy from financial disaster. And for two full years, the federal funds rate remained at 0%.

But in March 2022, the Fed began raising the rate by 0.25% and indicated that it would be the first of many. By the May 2022 meeting, the Fed was already announcing a second increase of 0.50%, this time around. But both of these hikes were prelude to a bigger increase of 0.75 percentage points announced by the Fed in mid-June and then another 0.75 percentage point hike on July 27.

Before the Fed makes any rate changes, it usually has a fair understanding of what they will unveil before actually announcing it. As a result, many banks and credit unions begin increasing the advance rate, while others choose to wait until the rate hike is confirmed.

The Fed’s next meeting will be announced on September 21.


What is the projected trend for CD rates?

The Fed’s four rate hikes this year are just the beginning. raising rates is one way fight inflationAnd with US inflation running exceptionally hot right now, the Fed is publicly planning to implement a series of rate hikes through 2022 and potentially into 2023.

While the Fed rate does not affect long-term debt such as mortgage rates, it directly affects the direction of short-term consumer credit and deposit rates. So many 2022 hikes are yet to come, one would be CD rates expected to rise Quite high as this year progresses.

That doesn’t mean you should avoid locking in CDs anymore. But it does mean that you should consider shorter-term certificates so that you are able to capitalize on higher rates that may not be available in the not too distant future. Another option is to consider a special CD type, sometimes called an “increase your rate CD” or “step-up CD,” which allows you to activate a rate increase on your existing CD if: Rates become very high.

Rate Collection Method Disclosure

Every business day, Investopedia tracks rate data from more than 200 banks and credit unions that provide CDs to customers nationwide and determines the daily ranking of top-paying certificates in each major period. To qualify for our lists, the institution must have federally insured (FDIC for banks, NCUA for credit unions), and the minimum initial deposit amount of CDs must not exceed $25,000.

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