CD Rates Forecast: Will Rates Go Up or Down?
CD rates have been at multi-year highs, but how long will they last? Here is where rates stand now, what drives them, and what to consider before locking in.
Current Best CD Rates
What Drives CD Rates?
- 1.Federal Reserve policy
The Fed funds rate is the single biggest driver. When the Fed raises rates, CDs follow within weeks. When the Fed cuts, CDs drop. CD rates generally track within 0.5-1.5% of the Fed funds rate.
- 2.Bank competition
Online banks compete aggressively for deposits, which pushes rates higher. When banks need deposits (to fund loans), they raise CD rates. When they have excess deposits, rates drop even if the Fed holds steady.
- 3.Inflation expectations
If inflation stays elevated, the Fed keeps rates higher for longer, supporting CD rates. If inflation drops quickly, the Fed cuts sooner and CD rates fall.
- 4.Economic conditions
A strong economy with low unemployment supports higher rates. A recession or economic slowdown leads to rate cuts as the Fed tries to stimulate borrowing.
What Should You Do?
If You Think Rates Will Fall
- •Lock in a longer-term CD (12-24 months) to guarantee today's rate
- •Build a CD ladder to capture high rates at multiple maturities
- •Consider I-Bonds for inflation protection alongside CDs
If You Think Rates Will Rise
- •Keep money in a HYSA to benefit from rising variable rates
- •Use short-term CDs (3-6 months) so you can reinvest at higher rates soon
- •Avoid locking into long-term CDs that could leave you with a below-market rate
Frequently Asked Questions
Will CD rates go up in 2026?
CD rates are closely tied to the Federal Reserve's target rate. If the Fed holds rates steady or raises them, CD rates could increase or hold. If the Fed cuts rates, CD rates will decline. Most forecasters expect rates to gradually decrease through 2026 as inflation moderates.
Should I lock in a CD now or wait?
If rates are expected to decline, locking in now guarantees your current rate for the full term. If you wait and rates drop, you will get a lower rate. However, if you think rates will rise further, a shorter-term CD or HYSA gives you flexibility to lock in later at a higher rate.
Why are longer-term CD rates sometimes lower than short-term?
This is called an inverted yield curve. It happens when the market expects the Fed to cut rates in the future. Banks set longer-term CD rates based on where they think rates will be, not where they are now. When rate cuts are expected, longer CDs pay less because the bank expects to pay less on future deposits.
How does the Fed funds rate affect CD rates?
Banks fund CDs partly with deposits and partly with Federal Reserve borrowing. When the Fed raises its target rate, borrowing costs rise and banks increase CD rates to attract deposits. When the Fed cuts rates, banks lower CD rates because their funding costs drop.
What is the best CD term to get right now?
It depends on your outlook. If you think rates will fall, lock in the longest term where the rate is still attractive. If you are unsure, a CD ladder (splitting across 6, 12, 18, and 24-month terms) hedges your bets.