Key Takeaways
- CD rates are directly impacted by the federal funds rate, which the Fed has kept at a 23-year high for almost a year now.
- As a result, the best CDs are paying historically high rates of up to 6.00% APY, with dozens of certificates offering rates above 5%.
- Inflation remains above the Fed's target level, keeping the central bank in "wait and see" mode until it's ready to reduce interest rates.
- But with an encouraging inflation reading last week, the Fed could be moving towards a first rate cut this summer or fall.
- Rates on new CDs will begin dropping as soon as the Fed appears ready to reduce rates—even before it actually does so.
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Today's Stellar CD Rates
In the past 20 years, there's hardly ever been a better time to put money in a certificate of deposit (CD). That's because you can earn historically high returns—with top rates between 5% and 6% in most CD terms—with virtually no risk or uncertainty. That's remarkable when you consider that at the start of 2022, the top nationwide CD rates ranged from just 0.5% to 1.5% APY.
The 2023 surge in CD rates was triggered by the Federal Reserve's historic rate-hike campaign, aimed at tamping down post-pandemic inflation that had reached a 40-year high of 9.1%. By raising the federal funds rate 11 times between March 2022 and July 2023—to its highest level since 2000—the rates that banks and credit unions offered on savings and CD accounts also skyrocketed.
Every business day, Investopedia tracks the rates of more than 200 banks and credit unions that offer nationally available CDs to determine our daily ranking of the best nationwide CD rates. Currently, you can earn as much as 6.00% with the top-paying CD in the country. Additionally, almost another full dozen options pay 5.40% APY or better on terms up to 1 year.
Alternatively, you can earn as much as 5.15% with a 2-year CD or up to 5.00% APY for a 3-year term. Beyond that time frame, you can lock in an upper-4% rate for a term of 4–5 years.
Inflation vs. CD Rates
Interest rates on certificates of deposit are not directly related to the inflation rate. However, inflation levels influence the Federal Reserve, which in turn impacts what banks and credit unions offer for savings and CD rates.
Since July 2023, the Fed has been in a holding pattern, watching and waiting for inflation to fall toward its 2% target level before it makes further rate changes. Early this year, it was expected the Fed would make as many as three rate cuts by the end of 2024. And as a result, CD rates softened a bit after reaching a peak in October and November 2023.
But instead of continuing downward as the Fed hoped, inflation has lately proven stubborn, including an April reading that moved notably upwards. While last week's Consumer Price Index (CPI) reading showed an encouraging downtick, inflation is still wavering well above 3%.
The stalled progress against inflation has caused the Fed to not only delay the start of rate cuts but also to back off the number of predicted decreases this year. At its latest meeting, concluded June 12, the Fed released its quarterly "dot plot," which showed that the majority of Fed committee members now predict just one or two rate cuts this year.
What This Means for CD Rates
Last week's mildly positive inflation report wasn't enough to significantly change the Fed's public stance. The official June 12 statement still made it clear that the Fed will be watching for further evidence that inflation is coming sustainably down toward the central bank's 2% target.
But with the May inflation rate moving down instead of up, financial markets are feeling more optimistic that a Fed rate cut is on the near horizon. While the CME Group's FedWatch Tool shows that only 10% of federal funds futures traders expect the Fed to lower rates as soon as its July 31 meeting, more than 60% believe a rate cut will arrive by the Sept. 18 meeting.
If the majority bet is right, that means the federal funds rate could come down in just three months. But for CD rates, the impact would likely arrive sooner. That's because banks and credit unions generally don't wait until a Fed rate change is officially announced. Rather, they begin adjusting rates as soon as it's clear the Fed will be lowering rates at its next meeting.
That means time is of the essence to lock in one of today's historically high CD rates—while you're sure you can. More economic data will be released between now and the Fed's July 31 meeting, and it's always possible the Fed will make a move that seems unlikely right now. So rather than get caught trying to grab a CD when rates are falling, it's wise to secure one soon—with longer terms providing rate guarantees that extend far into the future.
18 Best CD Rates for June 2024: Up to 6.00% APY
Best High-Yield Savings Accounts for June 2024—Up to 5.55%
Best Money Market Account Rates for June 2024—Up to 5.35%
How We Find the Best Savings and CD Rates
Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account's minimum initial deposit must not exceed $25,000.
Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.
