The Federal Reserve’s monetary policy decisions will significantly impact certificate of deposit (CD) interest rates in 2025. Experts predict that CD rates may drop due to the Fed’s projected lower number of rate cuts, while rates staying steady or rising are less likely.
According to experts, CD rates are directly influenced by the federal funds rate, and a decrease in this rate can lead to lower CD rates. A few factors contributing to a downward trend for traditional CD rates include slowing or declining inflation, lower demand for credit, and slower economic growth.
However, Ben Alvarado, executive vice president at California Bank and Trust, suggests that lower CD rates present an opportunity to diversify financial strategies. Laddering CDs can help investors take advantage of higher interest rates with long-term CDs while maintaining liquidity with short-term CDs.
CD rates are expected to stay the same in 2025 if current economic conditions remain steady. This would indicate a stable U.S. economy and the Federal Reserve’s neutral stance on monetary policy. If CD rates rise, it could be due to a reversal of the Fed’s rate-cutting trend or an increase in inflation.
The bottom line is that the outlook for CD interest rates in 2025 depends on the economic environment. Experts advise locking in higher CD rates while they’re available and comparing options to find the best terms and yield possible, especially if building an emergency fund or saving up for a big expense.
Source: https://www.cbsnews.com/news/whats-the-cd-interest-rate-forecast-for-2025