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CD Rates Could Reach 5.6% APY This Year. But Experts Say You Shouldn’t Wait to Lock In a CD

With additional Fed rate hikes expected, high-yield savings and certificates of deposit rates may climb a little higher.

Steven Puetzer/Getty Images

Last week, the Federal Reserve halted its run of 10 consecutive rate hikes since March 2022. But that doesn’t mean rate increases are over. While the current federal funds rate range sits at 5.00% – 5.25%, Fed Chair Jerome Powell expects this rate to reach 5.60% by the end of the year. This means the Fed likely isn’t done raising rates yet. 

“Nearly all Committee participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year, said Powell at the June Federal Open Market Committee meeting. “But at this meeting, considering how far and how fast we have moved, we judged it prudent to hold the target range steady to allow the Committee to assess additional information and its implications for monetary policy.”

Savings accounts and certificates of deposit have reaped the benefits of higher annual percentage yields for more than a year, and additional rate hikes could mean rates go even higher -- potentially as high as 5.60% APY, according to experts. We’ll give a rundown of where rates stand for now and what experts expect will happen next. 

Savings rates hold steady this week

All banks we track at CNET held savings rates steady this week, except for CIT Bank, which pushed its high-yield savings account APY up to 4.95%. Experts believe savings APYs won’t see big increases like we saw last year and expect rates to remain stagnant for a while. 

“For savers -- I would imagine that you won’t see any more increases in interest rates on their savings accounts until the next rate hike again,” said Herron. 

In the meantime, stashing money in a high-yield savings account can still come in handy. Most banks aren’t decreasing rates, so there’s still plenty of time to earn a decent return on money you’re setting aside. Even though your return will be unpredictable since savings accounts have a variable rate that may not increase often, there’s a chance that your savings rate could go up even higher throughout the year to give you a bigger return -- especially if the Fed increases rates again later this year.

Short-term CD rates still linger around 5% 

Like savings accounts, most CD rates for banks we track at CNET remained the same this week. Barclays increased its five-year CD to 4.35% APY, while CFG Bank and MYSB Direct increased their one-year terms to 5.42% and 5.23%, respectively. Lastly, Rising Bank increased its one-year and 18-month CDs closer to 5% -- bringing them to 4.80% and 4.95% respectively. Other banks we track kept CD rates the same, with most short-term rates still over 5% APY, while shorter terms hover slightly lower around 4.00% APY.

Will CD rates continue to rise?

Various factors, including economic conditions and central bank policies, influence inflation and interest rates. “If the Federal Reserve responds to rising inflation by increasing rates, CD rates could potentially rise as well,” said Paul Miller, a certified public accountant and founder of Miller and Company. Banks may only significantly increase rates if the Fed raises rates by more than 0.50% for each rate hike later this year.

Since the Fed’s movement more heavily influences some CD terms, it’s possible some CD rates may climb above the Fed’s 5.60% projection for the federal funds rate. Miller agrees, though he noted that there’s no guarantee this will happen. 

Is now the time to lock in a CD?

On the other hand, some experts don’t believe certificates of deposit rate increases will be significant. 

“We believe we have largely hit the peak in interest rates,” said Adam Coons, certified financial analyst and portfolio manager at Winthrop Capital Management. “While we may see fluctuations in near-term rates, ultimately, we see the path of rates skewed to the downside rather than the upside.” Therefore, Coons believes now is the time to lock in a CD, before rates start to go down. 

While you could hold out to see if rates climb higher in the coming months, locking in a long-term CD right now to earn a guaranteed return on your money at a high rate may make more sense, depending on your financial situation. 

Ultimately, trying to time the market may not be worthwhile -- but this all depends on how much you have in savings, and when you need access to your money. Even if five-year CDs reach the Fed’s projected funds rate, the difference in your return may not be significant enough to wait. 

Let’s look at how your return would differ if you deposit $1,000 into a five-year CD at 4.50% APY, compared to higher rates you might be able to lock in if you wait to open the CD, based on CNET’s sister site Bankrate’s CD calculator

APYEnding balanceReturn

Based on this example, if you wait until the end of the year with the optimistic approach that rates will reach 5.60% APY, you can earn $67 more. This may or may not make a difference in your financial goal. Locking in a CD rate now still offers a good return, and offers peace of mind knowing that no matter where rates go, you’ve secured a competitive APY.

You should also factor in the time it takes your CD to mature if you decide to wait to see where rates go next. If you need the money in exactly five years, waiting six months for rates to go up may set back your timeline -- and if you need the money sooner, paying an early withdrawal penalty could eat into your return.

More flexible savings options to explore

If you’re still working on building up your savings and aren’t ready to lock in a long-term CD, the current high-rate climate can help you earn a little extra back while growing your money.

“While locking in the high rates for a longer period of time in a CD is an appealing strategy, we find that for most people the availability and liquidity of savings accounts is more important than increased returns,” said Coons. 

First and foremost, you should build an emergency fund in an easily accessible account, like a savings account, said Miller. If you’re already set with emergency savings, consider a diversified approach by allocating funds across a mix of investment options, such as CDs, high-yield savings accounts, stocks, bonds or mutual funds, said Miller. This way, you can balance risk and potential returns. 

Building a CD ladder is another option for extra savings you won’t need to access anytime soon. This strategy lets you stagger several CDs across varying terms, letting part of your funds come due as the first time expires, so you can take advantage of higher rates if rates continue to climb. But if you want to keep your savings easily available, a high-yield savings account can help you earn over 4.00% APY on your savings.

The bottom line

How you allocate your savings in today’s rate environment can be tough since rates are high, and there’s a chance that rates will go up, but likely not by much. Instead of chasing yield, think about the goals you have for the money you’re saving. You may choose several savings vehicles to diversify your portfolio and maintain flexibility when needed. Regardless of the goal, saving what you can and earning a return while rates are still high is important. The amount -- big or small -- can add up quickly, especially when you’re earning interest.

Dashia is a staff writer for CNET Money who covers all angles of personal finance, including credit cards and banking. From reviews to news coverage, she aims to help readers make more informed decisions about their money. Dashia was previously a staff writer at NextAdvisor, where she covered credit cards, taxes, banking B2B payments. She has also written about safety, home automation, technology and fintech.