CD Rates Have Climbed Again in Every Term—But Will November Be the Peak?

CD Rates Climbed in All 7 Terms, Setting Records in 4

Once a month, we get hard-and-fast numbers from the Federal Deposit Insurance Corporation (FDIC) on how average certificate of deposit rates have changed. Representing all FDIC banks on Oct. 31, the latest CD rate averages were published yesterday—and it was a rosy report.

For the 13th time since deposit rates began climbing in February 2022, the rate average for all seven major CD terms—from 3 months to 5 years—climbed compared to the previous month.

For 6-month CDs, this represents the 20th consecutive monthly rate increase. And the average 1-year CD rate has risen for 22 months straight, minus a single month when it held steady.

Not only that, but in the four shortest terms of 3 months, 6 months, 1 year, and 2 years, the monthly FDIC averages reached new records in October—their highest levels in more than 20 years. Especially notable was the climb in the 3-month CD rate average, which jumped 20 basis points. Gains in the other three record-rate terms ranged from 4 to 6 basis points.

Today's historically high CD rates come compliments of the Federal Reserve, which aggressively hiked the federal funds rate between March 2022 and July 2023 in a fight against post-pandemic inflation. Across its last 14 meetings, the central bank has raised the benchmark rate 11 times for a cumulative increase of 5.25%—taking it to its highest level since 2001. This in turn has pushed banks and credit unions to offer increasingly higher rates on savings accounts, money market accounts, and CDs—raising those returns to historic levels as well.

The FDIC only began calculating and publishing these averages in 2009. So we can definitively say the averages today are higher than at any time in the last 14 years. But since CD rates and the federal funds rate are so directly correlated, it's fair to say we've not seen CD rates this high in likely 22 years, given that the fed funds rate has not been this high since 2001.

Earn 3 to 4 Times More by Shopping for the Best CDs

The FDIC's monthly averages are mostly useful for understanding the general trend of CD rates. But no CD shopper should be content with anything even close to average. That's because it's easy to find certificates paying 3 to 4 times the national average—sometimes even 5 times—by shopping from our daily ranking of the best nationwide CD rates.

Take 6-month CD rates as an example. The national average is an underwhelming 1.43% APY. But with the best 6-month CD available nationwide, you can earn an eye-popping 6.00% APY, with numerous other options paying 5.75% APY or better. The same is true in the other CD terms—you can almost always earn at least three times as much as the national average with one of the country's top-paying offers.

Have CD Rates Peaked?

At the last two Fed meetings, the rate-setting committee chose to maintain rates at current levels. Fed members wanted to allow time for more economic data to emerge so they could better assess the lagging impact of previous rate hikes. But in his post-announcement press conference on November 1, Fed Chair Jerome Powell made it clear that holding rates in place right now does not necessarily mean the committee is finished with increases.

"We haven't made any decisions about future meetings," Powell said. "We're going meeting by meeting."

Since then, however, encouraging inflation data has been released, and as a result, financial markets now overwhelmingly believe the Fed will not make any further increases. According to CME Group's FedWatch Tool, the current probability of a Fed rate increase at any of the next three meetings (December, January, and March) is only 5-7%.

If it proves true that the Fed's rate-hike campaign has reached its end, that translates to an end in the climb for CD rates as well. And while it's expected the federal funds rate would stay at its current level for some time, many banks and credit unions will begin to ease off their high rates once they feel confident that no further Fed hikes are on the horizon.

In fact, we have already seen a softening in the best CD rates over the last two weeks. During the last two months, six different offers graced our daily ranking of the best CD rates with a return between 6.00% and 6.50% APY. But all of those were ultimately taken off the market, reducing the leading national rate to 5.80%. A new 6.00% CD was just unveiled yesterday, but the total number of CDs in our ranking that pay 5.75% or better has also declined.

All this points to it being a good time to lock in a historically high CD rate while you still can. Perhaps rates will remain stable for some time, but there is always the risk they will start drifting steadily downward. And the odds of 2024 rate increases are looking increasingly slim.

How We Find the Best CD and Savings Rates

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer money market, savings accounts, and CDs to customers nationwide, in addition to determining 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.