3 CD account types to consider before the July inflation report

The next inflation report is scheduled to be released on July 11, detailing the state of inflation for June 2024. And if the report shows another drop in inflation, as the previous two months did, it will again reset expectations for a cut to the federal funds rate.

While many had expected multiple cuts to that rate earlier this year, it now appears likely that only one will come in 2024. But while a single rate cut could help borrowers, it will hurt the returns savers have been used to in recent years, particularly with certificates of deposit (CD) and high-yield savings accounts. Even a hint at an upcoming formal rate cut could result in lenders offering lower rates on these savings vehicles than they have been.

Against this backdrop, there's a compelling case for opening a long-term CD ahead of this week's inflation report to lock in today's readily available elevated rates. But which CD term should savers consider? While the answer to this question is personal, there's a compelling case to be made for select terms right now. Below, we'll break down three of them.

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3 CD account types to consider before the July inflation report

Ready to lock in today's high rates before they start falling? Here are three CD account types to consider opening before the July inflation report is released.

1-year CDs

Short-term CDs are considered to be those that mature in 12 months or less. But in the face of today's unpredictable rate climate, a 1-year CD could provide the exact mix of predictability and high rates that most savers are looking for. By opening a 1-year CD now, you could lock in a rate of 5% or higher on your money, resulting in hundreds and potentially thousands of dollars worth of earned interest, depending on the deposit that's made. And your funds won't be locked away for so long that you'll need to account for an early withdrawal penalty, as many savers can afford to leave some money untouched for the full year term. The maturity date will also allow you to explore other, potentially better savings options sooner than if you had locked your money away for a significantly longer time.

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18-month CDs

Similar to the benefits of opening a 1-year CD now, an 18-month one may also be worth considering. Savers can lock in a rate of around 5% now, allowing them to earn the same amount of interest as they would on the 1-year CD option for an extra six months. This option is particularly beneficial for those savers who want to capitalize on today's high rates but want to do so for a while longer while the repercussions of inflation and other political and geopolitical factors have a chance to work their way through the broader economy. 

3-year CDs

3-year CDs may not come with the rates that their shorter-term counterparts do (a reversal from historic trends) but with rates around 4.50% or higher right now, they're still an attractive way for savers to earn an elevated return for years to come. While no one knows where CD rates will be in three years, recent volatility in the market shows that they could drop significantly (they were hovering around 1% in 2020 and 2021, for example). So for savers who can afford to leave a portion of their money untouched for a few years, a 3-year CD could be the way to do so. By opening one of these accounts now savers will earn an elevated rate for multiple years, regardless of any volatility in the market that takes place this year – or in 2025 or 2026, either.

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The bottom line

The rate environment could soon be changing and CD accounts won't be immune from those developments. Understanding this, then, and ahead of the new inflation report that could further affect rates on these accounts, savers should consider locking in a long-term CD rate now. With a 1-year, 18-month and 3-year CD all offering unique advantages now, there are multiple ways savers can protect themselves against rate cuts for the future. But they'll need to be proactive and start shopping for the best rates and terms now. The window of opportunity to earn today's high CD rates could soon be closing.