Why you should open a CD in mid-June
As homebuyers in today's market know, timing is everything. If they had acted in 2020 or 2021, for example, they'd have locked in an ultra-low mortgage or mortgage refinance rate. Over the next few years, however, inflation surged and rates more than doubled, currently hovering near their highest point since 2000. So it's critical to act when the opportunity presents itself.
That's also true for savers and those looking to exploit today's high-rate climate. By opening a high-yield savings or certificate of deposit (CD) account in the last few years, savers were able to earn exponentially more than if they had acted when rates were low.
The timing surrounding a CD opening, however, is also critical to get right. And despite some cooling in the inflation rate, now is still an opportune time to get started. And there are a few compelling reasons why savers may want to be prepared to open an account next week, in mid-June. Below, we'll break down two of them.
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Why you should open a CD in mid-June
If you've been considering opening a CD this inflationary cycle, the timing could be right to act next week, specifically on June 12 and June 13. Here's why:
The next inflation report will be released
Inflation reports from the Bureau of Labor Statistics have been mixed so far in 2024, with most showing little progress in further reducing the inflation rate. After rising in March inflation barely fell in April, moving from 3.5% to 3.4%. That's more than a full percentage point above the Federal Reserve's target 2% goal.
But a new inflation report will be released on June 12, revealing the latest progress toward taming inflation. If that report is as disappointing as many of the others releases this year, it could indicate a "higher rates for longer" approach taken by the Federal Reserve. And if the report is particularly problematic, it could result in the Fed raising rates — already at a 23-year high — even higher to complete the cooling of this inflationary cycle.
If either happens, then, savers should be prepared to take advantage of the rate climate (CD rates change often) by locking in the highest CD rate they can find. Since rates on these types of accounts are locked, savers could earn high returns for months and even years to come, even if inflation and interest rates were to fall in the future.
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The next Fed rate announcement will be released
In an ironic twist, the Federal Reserve will release its latest announcement on the future of interest rates on the same day the newest inflation report comes out. But a formal hike to the federal funds rate — currently at a range between 5.25% and 5.50% — doesn't necessarily have to occur for rates on CDs to head upward.
Even a simple indication that rate cuts will be put off to later in the year or be pushed off into 2025 and beyond, could cause a slight increase in what lenders offer on savings vehicles. So those looking for a CD should be prepared to act, both on June 12 and June 13, after the revelation of the inflation numbers and Fed announcement have had a chance to reverberate throughout the wider economy.
Plus, even if the Fed announces an imminent cut — which appears unlikely at this stage — it will almost certainly be a minimal one (25 basis points to start). While that may potentially reduce what you can earn with a CD, considering that many come with rates over 5% right now, it's still worth opening for many savers.
The bottom line
This June offers a rare opportunity for savers to take advantage of both inflation and the Fed's interest rate actions — on the same day. However, it will take some time to research your options and understand which lenders are offering the best rates and terms. So consider starting now so you're prepared to act when the opportunity arises. And be sure to carefully consider the pros and cons of CDs right now as depositing too much into one could ultimately result in paying an early withdrawal penalty to get your money back.
