A New High-Yield Option Joins the Ranks

Will CD Rates Go Up in 2023?

This year has already seen CD rates hit record levels, but it’s possible they could climb even higher. That’s because some banks and credit unions are still reacting to the central bank bumping the federal funds rate higher at its July 26 meeting. Also important is that the Federal Reserve has notably kept the door open to further 2023 increases.

The Fed has been aggressively combating decades-high inflation since March of last year, with fast-and-furious hikes in 2022 that eased to more moderate increases in 2023. Last month’s bump took the cumulative increase to 5.25%, raising the fed funds rate to its highest level since 2001. That’s created historic conditions for CD shoppers, as well as for anyone holding cash in a high-yield savings or money market account.

The Fed’s official July announcement provided no strong indications on whether it will raise its benchmark rate even higher this year. The written statement simply reiterated the Fed’s commitment to bring inflation back down to its target level of 2%.

In a speech at the Jackson Hole Economic Symposium Friday, Fed Chair Jerome Powell said more rate increases were on the table if inflation doesn’t come down enough in the coming months or if economic growth is too fast (which would put upward pressure on inflation.) He said that the Fed could also keep its rate steady, and noted that raising it too much would hurt the economy unnecessarily. The Fed’s next meeting is scheduled for September 19-20. Recent public remarks from other Fed members, meanwhile, indicate they may be divided on the issue.

Currently, more than 80% of traders are betting the Fed will hold interest rates steady at its September meeting, according to the fed funds futures probabilities published by the CME Group. If the Fed goes against the market’s expectations and chooses to raise rates by another 25 basis points (bps), it would mark the 12th rate hike over the past 13 meetings, setting the benchmark rate to a range of 5.50% to 5.75%.

It’s much more likely that the Fed could hike its benchmark rate at its November or December meeting. Markets are pricing in a 55-60% chance that another rate hike will be announced after one of those two meetings.

Another increase by the Fed would certainly add a little more fuel to the fire for CD rates. But if the September decision is a rate hold, markets—and CD shoppers—could be left guessing if that’s a temporary or permanent pause. When it finally seems the Fed is ready to end its rate-hiking campaign for good, that will signal that CD rates have likely peaked.

Rate Collection Methodology Disclosure

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs to customers nationwide and determines daily rankings of the top-paying certificates in every major term. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the CD’s minimum initial deposit must not exceed $25,000.

Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don’t meet other eligibility criteria (e.g., you don’t live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.