How high will CD rates go? Experts weigh in

A certificate of deposit (CD) is a reliable and safe way to earn interest on your savings. CDs are deposit accounts that provide a guaranteed rate of return with no risk. Rates are set when you open the CD account and remain the same throughout the CD's term. CDs are also protected by federal deposit insurance up to $250,000 per account per institution.

There are several factors that affect CD rates, but the biggest is the overall interest rate environment. CD rates rise and fall in response to the federal funds rate, which is currently the highest it's been in 22 years. As a result, today's CD rates are as high as 5.50% APY.

How long will rates remain high, though, and what should you do to take advantage of them? We asked the experts for their opinions.

Check out today's top CD rates here.

How high will CD rates go? Experts weigh in.

While no one can predict exactly where CD rates will go, many experts believe we'll see no more than a slight increase over the next six to 12 months.

"Many believe the Fed has come to the end, or close to the end, of their rate hiking cycle," says Doug Johnson, CFA, senior investment strategist and partner HCM Wealth Advisors. "This would leave CD rates at, or close to, current levels for the foreseeable future."

Faron Daugs, CFP, founder and CEO of Harrison Wallace Financial Group, agrees. "I would anticipate CD rates will rise slightly over the next six months," he says. "However, I do not see them increasing significantly."

"The wild card would be if the Fed were forced to cut rates in the face of recession," says Johnson. "This would likely move CD rates lower than current levels."

A recent Bankrate study found that 78% of economists expect that Fed rate cuts won't begin until 2024. If this is the case, CD rates will indeed be likely to remain elevated for the next several months at least.

How much can you earn with a CD? Find out online now!

How to take advantage of today's high CD rates

Opening a CD now can help you enjoy today's high rates for the duration of the CD's term, even if overall interest rates go down. By contrast, savings account rates vary based on the federal funds rate, which means they could begin to go down at the beginning of 2024, if experts' predictions prove true.

"No one knows for sure, but if the Fed ends up cutting rates in 2024 or beyond, savers might find that their interest rates are declining on savings accounts," says Brian Spinelli, CFP, AIF, Co-CIO at Halbert Hargrove.

By opening a CD now, you can take full advantage of today's high rates. But which type of CD should you consider? The experts we spoke to were divided.

The case for long-term CDs

In general, "the longer the CD term, the higher the interest rate is likely to be," says Tim Melia, CFP, MBA, financial planner and founder of Embolden Financial Planning.

As a result, it may be wise to open a long-term CD while rates are high to protect yourself from future rate drops for a longer period. 

"For those worried about a possible recession and/or locking in longer-term income, considering terms longer than five years may make sense," says Johnson.

But other experts say now is the perfect time to opt for a shorter-term CD.

The case for short-term CDs

"Typically, the longer the CD term, the higher the interest rate," says Jim White, CFP, EA, founder of Great Oak Wealth Management. "That has not been the case in 2023. Shorter-term CDs under one year have had higher interest rates than longer-term CDs. Part of that is the expectation that the Fed will have to cut rates to fight a recessionary environment."

Daugs also recommends short-term CDs. 

"Consumers who buy CDs should focus on short-term CDs with a one-month to ninth-month maturity for another month or two, at least," he says. "Even though it appears like the Fed is winding down interest rate increases, there may be at least one more small rate increase. There is the potential for rates to go up a bit more."

"After September," Daugs adds, "it would most likely be prudent to begin locking in longer-term rates."

Consider your needs

That said, which CD term is best for you ultimately depends on both interest rates and when you expect to need the funds.

"Consumers should consider their need for liquidity before locking their money up in CDs where they will be penalized if they need to access it during the CD's term," says Dana Menard, CFP, founder and lead financial planner at Twin Cities Wealth Strategies.

Compare current CD offerings here to find your ideal account.

The bottom line

Like many investment options, the key to securing the best CD rates is shopping around and being selective. Rates may be high, but they still differ significantly among banks and credit unions.

So, compare the best CD rates from several institutions. Look for the highest rate you can get for the term you need based on when you anticipate withdrawing your funds. You can also get the best of both worlds by CD laddering, or opening multiple CDs with varying term lengths so you have regular access to funds while also capitalizing on the best rates.