Will CD Rates Stay High Into 2025? Here's What We Know so Far

There's a reason so many people are rushing to buy CDs these days. The rates you can get on a CD right now are among the highest we've seen in decades. And today's rates also aren't going to last forever. 

But will CDs still be worth buying in 2025? Probably. Here's what you need to know.

Why CD rates are so high right now

It's not difficult to find a CD paying 5% these days. If you dig around, you may even find a CD paying a bit more.

Why are CD rates currently so strong? It's because the Federal Reserve spent much of 2022 and 2023 raising its benchmark interest rate, known as the federal funds rate, to cool inflation and give consumers relief from sky-high prices. 

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The Fed doesn't set CD rates directly, but when its benchmark interest rate rises, CD rates tend to follow suit. 

The Fed has been holding its benchmark rate steady this year because inflation has cooled nicely over the past 12 months. But the Fed is also expected to start lowering its benchmark rate later in 2024. 

At this point, it's unclear as to how many rate cuts we can expect over the next six months. There may only be a single rate cut, or there may be room for two or even three. It'll all hinge on how inflation trends over the next few months. 

But either way, the general expectation is that the Fed will start cutting rates before 2024 is over. That means CD rates are likely to be lower in 2025 than where they are today.

How low will CD rates get in 2025?

In the absence of a crystal ball, that's a tough question to answer. But based on what we're seeing so far, it's unlikely that the Fed will implement drastic rate cuts in 2024. If anything, the central bank might lower its benchmark rate by 25 basis points (0.25%) one time or more. 

We won't necessarily see a direct correlation between the Fed's benchmark rate and CD rates. So if the Fed lowers its benchmark rate by 25 basis points, CD rates aren't guaranteed to fall from 5% to 4.75%. 

But all told, it's pretty fair to assume that there will still be opportunities to lock in a CD at close to 5% at the start of 2025. And there's a good chance you'll be able to open a CD at a rate of 4% or more for a good part of the year. 

Of course, as the new year progresses, CD rates could fall in line with future rate cuts from the Fed. But if you have a CD you opened in early 2024 that's coming due in early 2025, you may be able to get a really strong rate at the time of its renewal. 

That said, if you have extra money in a regular savings account you don't need for emergencies or near-term expenses, then you may want to open a CD this year (and soon). Getting a CD locked in before the Fed's next rate cut is the best way to secure a higher payout on your money. 

The Fed is next scheduled to meet on July 30-31. Whether there will be a rate cut announcement at that meeting or a future one in 2024 is up in the air. But if you like the idea of a CD at 5%, then your best bet is to open one between now and the end of July, just in case.