Current CD Rates April 2024

Last updated 05/28/2024 by

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Summary:

Market trends from March to April show steady CD rates with minor fluctuations influenced by the Federal Reserve’s steady interest rates, which have been sustained into 2024, amidst a backdrop of changing market expectations for potential rate hikes.

Transitioning from March to April, the CD market revealed patterns of consistency with select adjustments reflective of economic trends and the Federal Reserve’s ongoing financial strategies. Rates for 3-month, 1.5-year, 5-year, and 10-year CDs held firm, signaling a stable backdrop against an ever-evolving fiscal landscape. Notably, the rate for 1-year CDs increased by 0.20%, possibly pointing to increased investor confidence or an attractive yield curve scenario. Conversely, the 2-year and 4-year terms registered declines of 0.30% and 0.25%, respectively, which may suggest a market calibration in response to shifting economic forecasts or a dampened appetite for medium-term investments. The stability in the other term lengths indicates a cautious but steady approach by investors navigating the interest rate environment.

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So what’s up with the Fed lately?

Market sentiment has shifted significantly, with increasing bets indicating that the Federal Reserve might raise interest rates again. This possibility, which seemed unlikely not long ago, has emerged due to stronger-than-anticipated economic data from the U.S. and decisive remarks from policymakers. The options market now reflects a one in five chance of a U.S. rate hike in the next year, a marked increase from earlier predictions. This reassessment has notably impacted the bond market, with two-year Treasury yields reaching a five-month high and stocks experiencing fluctuations before rebounding.

Despite expectations early in the year for multiple rate cuts, traders have adjusted their outlook to now anticipate one or two modest rate cuts. However, continuous higher inflation figures have led to a minority but growing belief that the next Federal Reserve move could be to raise rates, especially if core inflation exceeds 3 percent. Fed officials have expressed a lack of urgency to cut rates and are open to increasing them if necessary to meet their economic goals. At the beginning of 2024, the chances of a rate hike were seen as below 10 percent, but the options market currently suggests there’s also a considerable chance of significant rate reductions in the next year, highlighting the prevailing uncertainty in economic forecasts.

Current CD Rates by term length

Term Length	Rate (APY) March	Rate (APY) April	Change
3 months	6.00%	6.00%	No change
6 months	5.55%	5.55%	No change
1 year	5.40%	5.60%	+0.20%
1.5 years	6.00%	6.00%	No change
2 years	5.20%	4.90%	-0.30%
3 years	5.00%	5.00%	No change
4 years	4.80%	4.55%	-0.25%
5 years	5.35%	5.35%	No change
10 years	4.00%	4.00%	No change

In 2023, the Federal Reserve implemented several rate hikes, with notable increases of 0.25% in March, May, and July, bringing the federal funds rate to a target range of 5.25% – 5.50%. These hikes were part of the Fed’s strategy to manage inflation and stabilize the economy. As a direct consequence, financial institutions adjusted CD (Certificate of Deposit) rates in response to the Fed’s decisions. Typically, when the Fed raises interest rates, CD rates also tend to rise, offering better returns for savers and investors.

Fed’s activity in 2023 and 2024

In 2023, the Federal Reserve responded to the dynamic economic conditions by implementing a series of interest rate adjustments. These changes were part of a broader strategy to curb inflation and ensure the stability of the economy. The action commenced in February with an increase, setting a pattern of proactive monetary policy maneuvers throughout the year. By July 2023, these incremental adjustments had raised the benchmark rate to a range between 5.25% and 5.50%, underscoring the Fed’s dedication to fostering monetary equilibrium and addressing economic uncertainties.

As of now in 2024, the Federal Reserve has maintained the interest rate levels set in 2023, continuing with a rate range between 5.25% and 5.50%. This steady stance reflects the central bank’s ongoing commitment to monitoring economic indicators and inflation trends closely. The Federal Reserve’s adherence to these rates aligns with its dual mandate to foster maximum employment and price stability. In the face of evolving economic conditions, the Federal Reserve’s decisions on interest rates are crucial for managing inflationary pressures and underpinning the broader health of the economy.

Date	Rate Increase (basis points)	New Rate Range
February 1, 2023	25	4.50% – 4.75%
March 22, 2023	25	4.75% to 5.00%
May 3, 2023	25	5.00% to 5.25%
July 26, 2023	25	5.25% to 5.50%

How does the Fed rate affect CDS?

Aspect	Description
Correlation	CD (Certificate of Deposit) rates are generally correlated with the federal funds rate. This implies that when the Federal Reserve hikes its interest rate, CD rates are also likely to rise, and the opposite is true when the Fed reduces its rate.
Lag in Response	While there’s a clear correlation between the Federal Reserve’s rate and CD rates, the latter might not instantly react to the Fed’s changes. Meaning, there might be a delay before financial institutions adjust the interest rates on their CDs after a Fed rate change.
Attracting Deposits	When the Federal Reserve increases its rate, banks and credit unions might boost the interest they offer on CDs to remain competitive and draw in more deposits. Higher CD rates can entice individuals to invest their money for longer periods.
Overall Financial Ecosystem Impact	The Federal Reserve’s decisions on interest rates influence the broader financial landscape. This encompasses not just CD rates but also interest rates on various other financial products, affecting the choices investors and consumers make.

How to compare CD accounts

To compare CD accounts, focus on the annual percentage yield (APY) for interest earnings, term lengths that match your financial timeline, minimum deposit requirements, and the bank’s stability. Shorter terms offer flexibility, while longer ones typically yield higher returns. Always consider potential penalties for early withdrawal. Compare these aspects across banks to find the most suitable CD for your savings goals.

Some of the highest CD rates in history were observed in the late 1970s and early 1980s when the Federal Reserve significantly raised rates to counteract high inflation. Conversely, during economic downturns, such as the 1981 to 1982 Recession and the Great Recession (2007 to 2009), the Federal Reserve lowered rates, leading to a decline in CD rates.

Expert Insight

Cashing in on innovative strategies, Brent Chandler, CEO of FormFree, comments on how banks and credit unions are adapting in April to attract depositors to CD accounts amid shifting interest rate landscapes and changing consumer preferences for savings products.

“Here’s how banks and credit unions get creative:

Short and Sweet CDs: Institutions offer a wider range of terms, like 18-month “vacation fund” CDs or 3-year “home improvement” CDs, catering to shorter savings goals and a more impatient generation.
Bonus Rate Bonanza: Think of limited-time offers with interest rates exceeding regular rates by 0.25% to 0.50%. Imagine a 1-year CD jumping from 1.25% to 1.75%—a sweet bonus for those willing to commit.
CD Ladders for Higher Returns: This strategy involves opening multiple CDs with staggered maturity dates. As each CD matures, you can reinvest at a higher prevailing rate, climbing a ladder to better returns over time.”

National average vs. highest CD rates

The national average CD rate is an aggregate of various financial institutions, which means it’s influenced by both high and low offerings. Some banks, especially online ones, offer higher CD rates to stand out in a competitive market and attract new customers. Traditional banks with physical branches might have lower rates due to higher operational costs. While shopping for CDs, it’s essential to consider both the interest rate and any additional features or benefits the account might offer.

Types of CDs

CD Type	Characteristics	Example
Traditional	Common CDs with fixed interest over a set period.	Deposit $1,000 for six months at 3% annually; get back principal plus interest.
Bump-up	Traditional CD allows a one-time rate increase if the bank raises a similar CD rate.	Buy a $1,000, three-year CD at 2%. If the bank raises the rate to 2.75%, you can adjust for the remaining term.
Step-up	Rates automatically increase at set intervals.	Buy a three-year CD at 1.75%; rate increases 0.25% annually.
Liquid (no-penalty)	No fees for early withdrawal but typically lower rates.	A $1,000, two-year CD with a rate under 3%.
Zero-coupon	Bought at a discount; no periodic interest but receives par value at the end.	Buy a $985, two-year CD; get $1,000 at maturity.
Callable	Fixed-rate, but banks can buy back early, especially if rates drop.	Buy a two-year, 3% CD callable after one year; the bank can repurchase if rates drop.
Brokered	Sold via brokerage; allows diverse CD holdings in one account.	Open a brokerage account and buy various CDs through it.
High-yield	Traditional CDs with higher yields.	Buy a two-year CD at 3.5% when others offer 2.75%.
Jumbo	Requires large deposits, possibly with higher rates.	Buy a $250,000, two-year CD at 2.5%; a regular CD offers 2.4% for $1,000.
Add-on	Allows additional deposits during its term.	Start a two-year CD at 2% with $1,000; add $500 semi-annually.
Foreign currency	Uses U.S. dollars, converted to foreign currency, and back at maturity; has exchange rate risks.	Buy a two-year, euro-denominated CD at 3% for $10,000, converted back to USD at maturity’s exchange rate.

Key takeaways

The Federal Reserve has maintained the interest rate from 2023 into 2024, with the range staying between 5.25% and 5.50%.
Options markets indicate a growing possibility of a rate hike within the next year, despite previous expectations for cuts.
CD rates for 3-month, 1.5-year, 5-year, and 10-year terms have shown stability, while 1-year terms increased and 2-year and 4-year terms declined.
The Fed’s rate decisions, influenced by economic data and inflation trends, remain pivotal in managing inflation and economic health.

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