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A certificate of deposit (CD) allows you to set aside your cash in an ultra-low-risk account while earning a guaranteed return for several months or years.
And until recently, savers enjoyed the highest CD interest rates in nearly two decades. However, after the Federal Reserve lowered the federal funds rate three times in 2024, those sky-high rates have been on the decline.
If you’re looking to grow your savings in 2025, you may be wondering if CD rates will hold steady, continue dropping, or even go back up. Here’s what could happen, according to experts.
Where are CD rates headed in 2025?
The national average rate for a 12-month CD is currently 1.80%. That average was slightly higher this time last year at 1.83%. However, in 2024, you could also find top rates hovering around 5% for CD terms of around one year. Today, the best rates are closer to 4%.
Read more: The best CD rates on the market today
Although today’s CD rates are well above historical averages, they’re still lower than what was available even a few months ago — and they’ve been on a downward trajectory so far this year.
Will that trend continue through the rest of 2025? That largely depends on the Fed’s policy decisions this year.
Following its most recent meeting, the Fed decided to maintain its target range for the federal funds rate at 4.25% to 4.50%, stating, “Recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid.” However, it noted inflation remains somewhat elevated.
This pause in rate cuts could suggest the Fed will keep rates elevated through 2025, which would be good news for savers who want to lock in today’s higher-than-average rates with a CD. However, additional rate cuts are still on the table for this year.
“The Fed is caught in wait-and-see mode,” said Robert Frick, corporate economist at Navy Federal Credit Union. “As Fed Chair Powell said last month, the central bank’s hands are tied until it sees the extent of the Trump administration policies.”
Frick added, “Trump tariffs are inflationary, as may be mass deportations — both of which could push up consumer costs and could halt or even reverse rate cuts, which would directly affect CD rates.”
Most likely, however, Frick said CD rates likely won’t change much — at least through the spring. “It’s also possible that lenders, anticipating a rise in rates, could increase rates preemptively to keep ahead of the competition,” Frick added.
Read more: Federal funds rate: What it is and how it affects you
What impacts CD rates, and is now a good time to invest?
CDs are sensitive to a number of factors, and understanding those variables can help you make a more informed decision about whether a CD is the right fit for your savings goals.
Short-term CDs are most directly influenced by the Fed's benchmark rate, according to Cristian deRitis, Deputy Chief Economist at Moody's Analytics. “It directly influences the interest rates on short-term Treasury bills and CDs of less than one year.”
As for longer-term Treasury bonds and CDs, deRitis said rates are impacted by investors' expectations for economic growth and inflation. “Financial conditions also play a role, with economic weakness and uncertainty pushing more investors to seek the relative safety of government bonds and CDs instead of stocks, cryptocurrencies, or other risky assets,” he explained. “During times of economic turmoil, this ‘flight to quality’ increases demand for fixed-income assets, driving their prices up and their yields (or interest rates) down.”
So, is now a good time to park your money in a CD? That depends on your financial goals. CD rates may have fallen slightly from their recent highs, but they still offer some of the highest rates available among deposit accounts. Locking in a higher rate now could be a good move if rates continue to decline this year.
Read more: Is a certificate of deposit (CD) still a good investment?
However, it’s not possible to say with certainty how the Fed will (or won’t) adjust the federal funds rate moving forward. If things change and the Fed raises its target rate, locking up your savings in a CD could mean missing out on better returns elsewhere.
If you’re on the fence about investing in a CD, consider an alternative such as a high-yield savings account or money market account, which offer similar rates to CDs and allow for more flexibility when it comes to withdrawing your funds. You could also set up a CD ladder, which allows you to take advantage of today’s high CD rates without tying up all your money for several years.
