Rachael Green
The upcoming June Fed meeting, the fourth of the year, has sparked speculation about whether the Federal Reserve will continue its "wait and see" approach or finally start cutting interest rates.
With savings rates hanging in the balance, many are watching closely to see what the Fed decides.
According to the CME Group's Fed Watch tool, economists are overwhelmingly confident that the Fed will once again hold rates steady at 4.25% to 4.50% for now.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Looking ahead to September, however, analysts anticipate the central bank to begin lowering rates again, with some forecasting rates to drop below 3.5% by the end of 2026.
If you’ve waited to open a CD account until now, or if your current CD account is nearing maturity, you’re likely considering locking in rates ahead of the next meeting.
Which CD should you open before the conclusion of the Fed meeting — a short-term or long-term account?
Use our tool below, powered by Bankrate, to compare CD rates today, or keep reading for our recommendations on the best CDs to consider ahead of the June Fed meeting.
Should you get a long- or short-term CD before the Fed meeting this week?
When comparing current CD rates, you’ll notice that the best rates offered are mainly on short-term CDs. However, the difference is minimal.
Given the potential for rates to start dropping as early as September, opening a long-term CD might be a more reliable way to lock in today's above average rates.
If you’re comfortable with a long-term time commitment, a five-year CD is a solid option, with some of the top earning accounts offering over 4% APY. While many one-year CDs have rates even higher, locking in a slightly lower rate will pay off in the long run.
Putting $5,000 in a one-year CD with a rate of 4.40% will earn you nearly $225 in interest, if compounded daily. But, if you want to open another CD once that one matures, you might have to settle for a much lower rate, depending on what happens in the next year.
On the other hand, if you lock in a rate of 4.28% for a five-year CD, you’d maintain that savings rate for the whole five years, earning $1193.04 in total, if compounded daily.
When the Fed raises or lowers interest rates, savings rates usually do the same — which is why rates rose substantially following the Fed’s rate-hiking campaign.
But as inflation cooled and the Fed kept interest rates steady, rates on savings accounts inched slightly down. They could drop even more if the Fed cuts rates in the next couple of years, as analysts expect.
Locking in high yields for as long as possible can be a smart savings strategy, but there’s one main factor to consider before you fund the account. When putting money in a CD account, you’ll have to be prepared to “set it and forget it.”
That means not accessing the cash until the CD matures, which can prove challenging if your cash is tied up for several years. If you do withdraw funds early, you’ll be charged a fee that can offset any interest earned.
If you can’t commit to a long-term CD, it’s still worth opening a short-term one. While you run the risk of rates dropping after it matures, it will still help you earn some extra cash without tying up your money for an extended time.
It's also worth opening a high-yield savings account, although these accounts won't allow you to lock in rates. For any savings (such as an emergency fund) that you need to be able to access at any time, a high-yield savings account allows you to earn a little interest without tying up your cash.
You can compare rates on savings account with our tool, powered by Bankrate, below:
Demand for long-term CDs is on the rise
In the last several years, there’s been a surge in the popularity of CD accounts driven by rapidly rising rates in response to the Fed's interest rate hiking campaign.
These increases followed a series of rate hikes in 2022 and 2023, which pushed the federal funds rate to its highest level since 2001.
However, the market started to course correct in 2024. The Federal Reserve cut interest rates three times to close out 2024, but they anticipate fewer rate cuts in 2025.
With so much uncertainty, consumers are looking for ways to keep their savings strong for as long as they can. For many, this means turning to longer-term CDs.
The number of savers shopping for one-year CDs on online marketplace CD Valet increased 150% in the first quarter of this year, the company reported, even when the yields offered on shorter six- to nine-month CDs were higher.
"Savers may be feeling more recession risk and choosing to trade maturity for rate, while they still can," says John Blizzard, Founder of CD Valet.
Related Content
-
Investing Abroad Could Pay Off — Here's HowCountries overseas are stimulating their economies, and their stocks are compelling bargains.
-
Retire in Belize for Stunning Natural Beauty and CultureBelize offers miles of protected land and ocean, a rich mix of cultures and a chill lifestyle. Best yet — the income requirement is just $2K per month.
-
The Top Fourth of July Fireworks and Celebrations Across AmericaFrom Boston to San Diego, these iconic celebrations light up the sky — and the spirit of Independence Day.
-
Why Retirees Need a Budget, According to a New RetireeA new retiree explains why retirees need a budget.
-
My First $1 Million: Air Force Veteran, 68, Duluth, Ga.Ever wonder how someone who's made a million dollars or more did it? Kiplinger's My First $1 Million series uncovers the answers.
-
Your Home + Your IRA = Your Long-Term Care SolutionIf you're worried that long-term care costs will drain your retirement savings, consider a personalized retirement plan that could solve your problem.
-
How to Choose a Mortgage Lender in Five StepsNot all lenders are created equal — here’s how to compare offers, rates and terms with confidence.
-
A Meteorite May Have Hit a Home in Georgia. Would Insurance Cover the Damage?In a rare event, a meteorite may have crashed through the roof of a Georgia homeowner. Here’s what home insurance would cover.
-
My Car Was Stolen — Here’s What I Did and How You Can Protect YourselfDon’t wait until it happens to you. Learn how to prepare for auto theft, protect your vehicle and respond quickly if your car is stolen.
-
This Savings Account Earns You More Than $4,000. Here's HowSee how a jumbo CD can help you reach your savings goals quicker.
