CD Rates Were Near Their Peak Before the Fed’s Next Move

A saver with $10,000 could still find a meaningful payday in June by locking up cash. Top certificates of deposit were advertising yields above 5%, while the Federal Reserve had just kept its benchmark rate at 5.25% to 5.50%, a 23-year high.

The question was whether to act before the Fed’s next meeting, scheduled for July 30-31, 2024.

Waiting had an obvious appeal. If policymakers held rates steady, banks might continue offering elevated CD yields. If inflation reaccelerated and markets pushed rate-cut expectations further into the future, short-term savings products could remain competitive, and newly issued CDs might even improve.

But the risk ran in the other direction. The Fed’s June economic projections showed officials had reduced their median forecast for 2024 rate cuts to one from three in March. That signaled patience, not an imminent easing cycle, but it also suggested that locking in a strong fixed rate could make sense for money that did not need to stay liquid.

CD rates do not wait for the official announcement. Banks price deposits according to funding needs and market expectations, so yields can fall before the Fed actually cuts. A saver who waits for confirmation may find that the best offers have already disappeared.

The sensible answer depends less on guessing Jerome Powell’s next sentence than on the cash’s job. Emergency funds belong in an accessible high-yield savings account, where the rate can change but withdrawals are generally easier. Money earmarked for a known expense six or 12 months away may fit a CD better.

A ladder can split the difference. Dividing cash among several maturities creates regular opportunities to reinvest while avoiding one large bet on a single rate path. Treasury bills are another alternative, particularly for savers comparing after-tax returns.

The fine print matters. Banks generally charge an early-withdrawal penalty, and the FDIC says depositors should check the maturity date, automatic-renewal terms and insurance coverage before opening an account.

For June 2024 savers, opening a CD before the July meeting was not a guaranteed win. It was a way to turn uncertainty into a known yield, provided the money could stay put.