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Are CD Rates Rising or Falling?
CD rates track the broader interest rate environment set by the Federal Reserve. Understanding the current trend can help you decide between a shorter or longer CD term.
What Drives CD Rate Changes
| Factor | Effect on CD Rates |
|---|---|
| Federal Reserve rate hikes | CD rates typically rise |
| Federal Reserve rate cuts | CD rates typically fall |
| Bank competition for deposits | Can push rates up independent of Fed policy |
What This Means for Your CD Strategy
If you expect rates to fall, locking in a longer-term CD now protects your rate for longer. If you expect rates to rise, a shorter-term CD (or a no-penalty/bump-up CD) lets you reinvest sooner at a potentially higher rate.
A CD Ladder Hedges Either Way
Splitting funds across multiple CD terms (6-month, 1-year, 2-year) means you're never fully locked into one rate environment — some funds mature regularly, letting you reassess and reinvest as conditions change.
Tracking Current Rate Trends
Federal Reserve policy announcements are the most direct signal of where rates are headed — following major financial news around Fed meetings can help inform your CD term decision.
Frequently Asked Questions
If you strongly expect rates to decline, locking in a longer-term CD now protects your rate for the full term, insulating you from future decreases.
A bump-up CD lets you request one rate increase during the term if rates rise, giving you some protection against being locked into a below-market rate — though it typically starts at a slightly lower rate than a standard CD.