Have CD and savings interest rates peaked? Here's what experts think

It's no secret that the Federal Reserve has been hiking interest rates recently. And while that has meant pricier mortgage loans and credit cards, it's also had a silver lining: higher rates on savings accounts and CDs (certificates of deposit).

Rates on both products have increased significantly over the last year. In fact, some banks are offering savings accounts and CDs with 5% APYs and higher. At that rate, depositing $10,000 in one of these accounts would earn you over $500 in just one year's time. 

Still, interest rates aren't set in stone. They actually vacillate quite a bit, and you should make sure you get the best rate on your savings account or CD while you can. 

Explore the top CD rates you could get right now.

Have CD and savings interest rates peaked? Here's what experts think

To help out, here's what experts say about today's interest rates — and where they might be headed next.

Rates are high — but nowhere near the highest point historically

Interest rates have increased on both savings and certificate of deposit accounts recently. According to the St. Louis Federal Reserve Bank, the average 12-month CD rate has climbed from a mere 0.15% rate in mid-2021 to the 1.72% it is today. Savings account rates also grew from 0.07% to 0.42% during that time — and that's just on traditional accounts. These days, many online banks are offering 10 times that on rates for high-yield savings accounts. 

Still, despite these recent upticks, interest rates are hardly near their highest point historically, experts say. 

"Going back to the Carter presidency when the Federal Reserve interest rate was more than 20% and inflation was extremely high, CD rates could be found in the 14% to 16% range," says Rob Burnette, CEO and financial advisor at Outlook Financial Center. 

That high Federal Reserve rate was key back then, because, as David Johnson, a certified financial planner and managing partner of Amwell Ridge Wealth Management, explains, "these rates correlate strongly with the federal funds rate."

"When the Federal Reserve increases its benchmark rate, interest rates across the economy, including mortgages, credit cards, and CD rates, increase," Johnston says. "Similarly, decreases in the federal funds rate cause CD rates to fall." 

This is why interest rates have increased considerably over the last 18 months. Since March 2022, the Federal Reserve has voted to increase its benchmark rate — or the rate that banks pay to borrow money — 11 times in an effort to fight inflation. Rates on other financial products have followed that same trajectory, rising steadily ever since.

Learn more about the CD rates available to you now.

CD rates may have peaked — or will soon

While interest rates might not be at their all-time high just yet, experts say we're likely at or approaching the peak of, where rates will go, at least for the near future.

"The market seems to think the Fed is done with the rate hikes, which would imply short-term rates are near a peak," says John Macke, chief financial officer at Merchants Bank of Indiana. 

According to the CME Group FedWatch Tool, which uses investment activity to predict future Fed moves, the likelihood of a rate hike at the group's September meeting — the next one on its docket — is a mere 12.5% as of August 11.

Just remember: A stop in rate hikes doesn't necessarily mean rates on savings accounts or CDs will fall. They may simply hold steady until the Fed actively opts to decrease its benchmark rate.

"The savings rate may moderate a little, but it's unlikely to go back to pre-pandemic levels anytime soon," says Ritesh Ranjan, business director at Capital One. "Inflation is at 3% — 100 basis points higher than the Fed's target of 2%. The Fed has indicated strongly that they will keep rates high as long as it takes for them to reach that target rate."

It all depends on inflation and the Federal Reserve

At the end of the day, where CD and savings rates go next will depend on inflation — and the moves the Federal Reserve makes in response. 

"It's really Fed driven at this point," Macke says. "If they raise rates again because of economic data or trends they don't like, that will likely cause upward pressure on deposit rates. If the economic data remains in the range that doesn't cause the Fed concern, it's most likely that the rate hikes stop and the Fed will take a wait and see approach for signs that either the economy is cooling too quickly — increased unemployment, low GDP increases or decreases — to decide on possible rate cuts."

The bottom line

The Federal Reserve will meet again in September, October, and December to determine its next moves. Until then, experts say rates are at or nearing their peak, so if you're considering opening a CD or high-yield savings account, now may be the time to do so. Find out what you could earn with a CD right now.