The Federal Reserve’s December meeting may bring expected interest rate cuts, making it a smart time to reconsider your finances. With inflation down and two rate cuts already issued in 2024, high-yield savings and CDs have seen declining returns.
To take advantage of the current rates before they decline further, consider opening a long-term CD now. Here are three reasons why:
1. Rates may start declining ahead of time: Lenders often adjust their offers in anticipation of a formal rate hike or cut, regardless of the Fed’s action. With an 86% likelihood of a 25 basis point cut, many will start lowering rates already.
Locking in high 18-month CD rates (4.30%) and 2-year CD rates (4.25%) now can be advantageous if you don’t act sooner. If the Fed cuts rates when they meet later in December, you may regret not having acted earlier.
2. Opening a CD now can prevent holiday overspending: With the expectation of exceeding last year’s holiday spending, consider using a CD as an incentive to limit your shopping tendencies. Early withdrawal penalties for accessing funds prematurely can help you stay on track.
3. Rates will be fixed: A long-term CD offers a high, fixed rate that remains unchanged for 18 months or more. This means you’ll have predictable returns regardless of any volatility or additional interest rate cuts issued during that period.
Given the anticipated Fed rate cut and the benefits of opening a long-term CD now, many savers can benefit from making this move before the December meeting. Be sure to calculate how much you can afford to deposit without incurring early withdrawal penalties in 2025 or sooner.
Source: https://www.cbsnews.com/news/why-you-should-open-a-long-term-cd-before-the-december-fed-meeting