Interest rates on certificates of deposits (CDs) increased substantially from 2022 to 2023—in lockstep with Federal Reserve rate hikes. Now, the national deposit rate for five-year CDs is 1.43%, up from less than 0.50% in June 2022. Yet many banks are offering rates well above that—the best five-year CDs have annual percentage yields (APYs) that exceed 4%, and some one-year CDs are offering APYs well above 5%.
CD rates rose thanks to the Fed's efforts to bring inflation down. However, as inflation has cooled off—from more than 9% in the summer of 2022 to under 3% now—the Fed has begun lowering interest rates once again. At the September 18 FOMC meeting, the Fed announced a 50 bps rate cut, with more cuts potentially following in November and December.
