Will CD rates increase in November?
Certificates of deposit (CDs) are a great alternative to traditional savings accounts, providing higher interest rates in exchange for the saver keeping their money in the account for a set period of time. The CD term varies, but can be a few months to a few years on average.
Right now, interest rates on CDs are high. This is partially because the Federal Reserve has made a series of interest rate hikes over the past 18 months in an attempt to control inflation. This has had a number of impacts on the economy, some of which aren't great for consumers — like higher rates on mortgages — and some very good for consumers, like higher rates on CDs and high-yield savings accounts.
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Will CD rates go up in November?
Whether or not CD rates go up in November will depend largely on the actions of the Federal Reserve.
The Fed meets again on October 31 and November 1, and there is a chance that it will raise interest rates again. The inflation rate for September was 3.7%, and while that is far from the highs that were seen in 2022, it is still a good deal higher than the Fed's target of 2.0%.
This could have an impact on CD rates. The rate hikes that have been enacted in the past year-and-a-half have had a big impact on CD rates.
On January 1, 2022, the average return on a one-year CD was just 0.14%. That was after the Fed had dropped rates to nearly 0 as a response to the COVID-19 pandemic. When inflation started shooting up, the Fed responded by raising rates. By September 2023, the average CD rate had increased to 1.89%, per data from Bankrate.
While there are no guarantees, if the Fed does choose to raise rates again when they meet at the end of October, there will likely be a corresponding increase to the average CD interest rate.
There is a chance that the Fed will choose to do nothing with interest rates. Inflation was high at the last Fed meeting, but not as high as it had been before, and the Fed did not raise rates.
If this happens again, there will likely be no change to CD rates. This doesn't mean CD rates will stay the same across the board. Rates will still fluctuate at various lenders, but there won't be an across-the-board change that there likely would be if the Fed were to act.
If the Fed were to surprise all of us and lower interest rates, there would almost certainly be a dip in CD rates across the industry.
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Should you open a CD in November?
Whether or not CD interest rates go up in November, it's still a good time to take advantage of CDs. Rates are higher now than they have been in years, so if you want to put money away safely and earn a good amount of interest, they are a good choice.
One thing to note is that CDs require you to leave your money in the account for the full term. If you withdraw the money before that term is up, you'll typically have to pay a steep penalty. Before you put money into a CD, make sure you can do without those funds for the full term.
The bottom line
The Federal Reserve is meeting again at the end of October, and there is a good chance they will raise interest rates again. This is likely to have a ripple effect in the world of certificates of deposit, as rates will likely go up — allowing potential savers to earn more by parking their money.
