CD Rate Predictions for 2024

As savers continue to enjoy some of the highest CD rates in over a decade, many are wondering what lies ahead for CD rates in 2024. We asked five experts to weigh in on this topic and provide their predictions.

Prediction 1: Yields on CDs will experience a modest decline

Greg McBride, chief financial analyst at Bankrate, believes that there will be a modest decrease in yields for CDs with maturities longer than one year. He anticipates that this decline will continue and eventually spread to shorter maturity CDs as the Federal Reserve moves closer to cutting interest rates. McBride suggests that top-yielding CDs may settle around 4% by the end of the year, down from a peak of over 5%. However, even with this decline, these yields will still outpace inflation, making it a favorable environment for savers in 2024.

Prediction 2: CD yields may soon start to decrease

Kimberly Palmer, a personal finance expert at NerdWallet, cautions that CD rates, despite their recent increase, might begin to drop soon. She points out that the rates rose at a slower pace in 2023 compared to 2022. The future direction of CD rates will largely depend on decisions made by the Federal Reserve and any changes they make to their interest rates. Banks are expected to adjust their rates accordingly based on the Fed's actions.

Prediction 3: Yields will stabilize in 2024

Fang Chen, an associate professor of finance at the University of New Haven’s Pompea College of Business, expects CD rates to stabilize in 2024. He foresees a peak in CD rates reaching the mid-5% APY range. However, Chen emphasizes that this prediction is contingent upon the prevailing economic conditions remaining resilient to current trends.

These predictions are influenced by various factors that impact CD rates, according to the experts. The decisions made by the Federal Reserve, the overall health of the economy, and major news events all play a role in shaping CD rates. Banks typically adjust their rates on new CDs in line with changes in the Fed's interest rates.

While it's impossible to predict the exact trajectory of CD rates in 2024, these insights provide valuable perspectives on what savers might expect in the coming months.

The Factors Influencing CD Rate Fluctuations

When it comes to CD rate fluctuations, the decisions made by the Federal Reserve regarding the federal funds rate play a crucial role. According to Chen, these decisions are closely linked to various macroeconomic indicators, particularly inflation and labor market dynamics. These indicators collectively determine the trajectory of CD rates.

Moreover, the landscape of online banking and fintech innovation has given rise to increased competition. Chen believes that this competition may lead to more favorable CD rate offerings, as financial institutions strive to attract a broader customer base.

Should You Consider Buying a CD Now?

Some experts believe that now is a good time to invest in CDs. However, nothing is certain. Ken Tumin, the founder of DepositAccounts.com, suggests that purchasing CDs before further rate cuts may be wise. While long-term CD rates are generally lower than short-term rates, Tumin advises including both long-term and short-term CDs, along with savings accounts, as part of a risk-free savings plan.

Tumin specifically recommends looking for long-term CDs that come with mild early withdrawal penalties. This allows you to close the CD early without incurring excessive costs if the need for money arises or if higher rate alternatives become available.

From a strategic standpoint, Chen advocates for prudent exposure to CD investments. He believes that given the minimal likelihood of an upward trajectory in both prime and CD rates in the near term, it is a good opportunity to lock in favorable rates based on current economic forecasts and the prevailing interest rate environment.

Ultimately, it is essential to evaluate your financial goals and risk tolerance before committing to CDs. WalletHub analyst Cassandra Happe advises keeping an eye on the interest rate environment and seeking personalized guidance from a financial adviser. As Ed Williams, senior lead planner at Facet, suggests, "The future is always unpredictable, so all you can do is make the best decision with the information you have now."