Fed's Rate Hike Could Be Its Last. Is Now the Time to Move Your Money to a CD?

On May 3, the Fed raised the federal funds rate for the 10th consecutive time -- putting the rate between 5% and 5.25%, its highest level since 2007. Many experts believe this will be the last time the Fed raises the rate this year. That means, if you want to move some cash into a certificate of deposit (CD), the clock might be ticking down to snag a CD at today's rates.

Is now the time to get a CD?

By good estimates, yes, if you're planning to move money into a CD, now might be the time to do it.

Many banks have raised CD rates several times over the past year, as the Fed has been consistently hiking interest rates since March 2022. While some banks may give CDs a little extra bump after Wednesday's decision, it's unlikely we'll see massive upward momentum. In fact, the opposite could happen: if the Fed pauses or starts cutting rates later this year, CD rates might fall from their peaks.

Some long-term CD rates have already started to retreat. This makes sense: Banks are probably anticipating the Fed will bring the fund rate down in the coming years, and they're adjusting long-term rates so they're not stuck paying high interest while the fund rate is back to a standard level.

Just take a look for yourself; the following is the average APY for a 5-year online CD, according to data from Deposit Accounts:

CDs with shorter terms are still averaging between 4.5% and 5%. But these rates aren't set in stone and will likely fluctuate as the Fed's future policies become more clear. To get a good idea of today's rates, you can find interest rates for various CD terms here:

• 6-month CD rates
• 12-month CD rates
• 3-year CD rates
• 4-year CD rates
• 5-year CD rates

Should you wait for the Fed's next meeting?

Again, if you're sure a CD is the right place for your money, I wouldn't wait until the Fed makes its next decision (June 14).

For one, many economists now expect the Fed to pause rates, with a possible cut starting later this year. Inflation appears to be winding down -- dropping from a high of 9.1% in June 2022 to 5% in March 2023 -- and the growth of the U.S. economy has slowed significantly, expanding at a snail's pace of 1.1% between January and March, less than half the growth of the quarter before that (2.6%).

Secondly, even if the Fed pulled a gotcha and raised the fund rate again, it's unlikely CD rates would climb significantly higher than they are now. Most of the strong upward growth in CD rates happened because banks were expecting the Fed to raise rates. Now the tables have turned: With a downward hike becoming more likely, banks might be less inclined to raise CD rates much higher.

My only hesitation isn't related to CD rates but to CD accounts themselves and how they work. If you don't want to lock up your savings for a significant amount of time, then a CD may not be the best option for you. You might be better off with a high-yield savings account, which would give you greater access to your money, even though the interest rate wouldn't be fixed like that of a CD.

But, by the looks of it, banks might be making the final call for depositors at today's CD rates. Now isn't the time to be greedy. If you want a CD, lock one in at today's rates before they're gone.