CD Rates Forecast for 2025: Are CD Rates Going Up or Down?

CD Rates Forecast for 2025

The Federal Open Market Committee (FOMC), a committee within the Federal Reserve, meets eight times a year to determine whether it will adjust its target rate range. This is the rate financial institutions use when borrowing and lending money between each other, but it influences the annual percentage yields (APYs) that banks and credit unions offer on CDs and savings accounts. It also affects annual percentage rates (APRs) on loans and credit cards.

When the committee last met in July, the rate range was left unchanged at 4.25% to 4.50%.

It's worth noting that a rate cut could still happen before the year is out, and that would likely push CD rates down. As of August 2025, some CDs have annual percentage yields (APYs) as high as 4.33%.

Are CD Rates Going up or Down?

At this point, signs point to CD rates going down in the near future. Still, consumers will have to wait and see how the next few months play out. Future CD rate changes depend on whether the Federal Reserve reduces the federal funds rate.

When the federal funds rate goes down, CD yields tend to do the same. But you'll likely pay less to borrow money, which can be good for your finances in a different way.

CD Rate Trends From 2020 to 2024

Thanks to a much lower federal funds rate, CD yields were relatively modest in early 2020 and during the COVID-19 pandemic. At one point, the federal funds rate decreased to almost zero, which had a real effect on CD rates. In April 2021, the average rate for a 12-month CD was just 0.15%.

Pandemic-era rate cuts were designed to reduce borrowing costs and stimulate the economy during an unprecedented economic time. But as consumer prices soared, the Federal Reserve carried out a series of rate hikes in an attempt to cool inflation. By June 2023, the federal funds rate had climbed to 5.08%. During this time, some CD yields exceeded 5%. The Fed's target rate held steady at 5.33% for most of 2024, before beginning its descent in September of that year.

Is Now a Good Time to Open a CD?

Putting money into a CD now might allow you to lock in a better rate before yields potentially drop later this year. Forecasters at investment research firm Morningstar are predicting rate cuts to continue into 2026 and 2027, but nothing is guaranteed.

CDs can help you grow your savings, but they aren't the right investment for everyone. Before opening an account, you'll want to make sure that:

• It aligns with your investment strategy. CDs are low-risk investments that can help diversify your portfolio. That could help offset risk from more volatile investments like stocks.
• You have a strong emergency fund. In most cases, you can expect an early withdrawal penalty for taking money out of a CD before the term expires. Having some cash reserves in a high-yield savings account can provide peace of mind if you run into a surprise expense.
• You don't have high-interest debt. Paying down high-interest debt could save you more money than you'd earn with a CD. The average credit card interest rate as of June 2025 was 22.25%, according to the Federal Reserve.

Where to Find the Best CD Rates

CDs are offered by a variety of financial institutions, but rates can vary widely from one to the next. Yields may also depend on the CD's term length and your deposit amount. Here are some simple tips for finding the best CD rates:

• Online-only banks: Online banks have fewer staffing expenses and less overhead than brick-and-mortar banks. Interest rates tend to be higher as a result.
• Credit unions: You might find a better CD rate at a credit union than a traditional bank. These not-for-profit financial institutions are known to prioritize their members.
• Brokerage firms: You can use a regular brokerage account to purchase brokered CDs. These often have higher interest rates than traditional CDs, but they may be callable. That means the bank may redeem the CD before the term ends.

Alternatives to CDs

If a CD doesn't feel like a good fit right now, you could explore these popular alternatives:

• High-yield savings account: Unlike a CD, a high-yield savings account allows for easy withdrawals. You can still earn a competitive interest rate, but your money won't be locked into the account.
• Bonds: These fixed-income securities carry little risk and can provide steady interest payments. When you purchase a bond, you're lending money to the bond issuer for a predetermined amount of time. That might be a company, a local municipality or the federal government. However, returns tend to lag behind CDs.
• Money market account: Rates on money market accounts can be on par with some high-yield savings accounts, and you'll also have the ability to use a debit card or write checks. That can provide more flexibility and easier access to your money.

The Bottom Line

The CD rates forecast for 2025 notes yields could decline before the year ends, which might affect your financial planning. But these things aren't set in stone, and no one knows for certain how the federal funds rate might change over the next few months—and into 2026 and beyond. The decision to open a CD this year will ultimately come down to your financial situation and goals.