With interest rates about to drop, savers will need to reexamine their investment strategies sooner rather than later.
Certificates of deposit (CDs) have been a saver’s delight as the Federal Reserve hiked its benchmark, short-term federal funds rate eleven times between March 2022 and July 2023 to 5.25–5.5%, the highest level in more than 20 years, to contain inflation.
The Fed’s now widely forecast to lower rates when its policy meeting concludes on September 18, and financial institutions will quickly follow suit on their deposit rates, experts say.
“Assuming the Federal Reserve does lower interest rates, there are steps savers can still take to maximize their earnings if they make timely decisions about their savings,” said Mary Grace Roske, head of marketing for CD Valet, an online CD comparison site, in an email.
How fast and by how much could CD rates drop?
You’ve likely missed the chance to secure the highest rates. Banks have already begun cutting their deposit rates in anticipation of a rate cut, said Ken Tumin, banking expert at DepositAccounts.com, which tracks and compares savings rates.
Learn more: Best current CD rates
The average one-year online CD yield as of August 24 was 4.97%, down from this year’s peak of 5.35% in early January and 4.99% on July 24, DepositAccounts.com shows. Online returns generally are higher than those offered by brick-and-mortar shops.
Rates will likely slip further if the Fed begins a series of rate cuts, experts said.
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