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Current CD Rates (Week Of December 25th, 2023)

Last updated 05/15/2024 by

Miriam Belen-Rodriguez

Edited by

On December 25th, the Certificate of Deposit (CD) market remained largely steady, with only the 2-year and 3-year terms experiencing changes. The 2-year term saw a slight increase in its rate from 5.29% to 5.39%, while the 3-year term decreased from 5.60% to 5.23%. This stability, with few exceptions, indicates a consistent trend in the CD market.
The week of December 25th demonstrated notable steadiness with slight variations in the Certificate of Deposit (CD) market. Most term lengths, including 3 months, 6 months, 1 year, 18 months, 4 years, 5 years, and 10 years, maintained their previous week’s rates, exemplifying the market’s consistent approach amidst economic uncertainties. However, there were some adjustments, with the 2-year term rate increasing slightly from 5.29% to 5.39%, and the 3-year term rate decreasing from 5.60% to 5.23%. These changes reflect the financial institutions’ responsive strategies to the evolving economic landscape and anticipation of the Federal Reserve’s policy directions. This period highlights the dynamic yet stable nature of the CD market.

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So what’s up with the Fed this week?

The Federal Reserve’s 2022 Survey of Consumer Finances (SCF) provides a mixed picture of American retirement savings, assessing changes between 2019 and 2022—a period marked by COVID-19 and economic upheaval, coupled with a challenging year for the stock and bond markets. Despite these headwinds, there was a government fiscal boost, steady employment, and a stock market that closed higher than in 2019. The SCF, which includes data on both 401(k)s and IRAs, suggested one would expect an overall improvement in retirement balances across different demographics. Indeed, for older, high-income households with a 401(k), the median balance rose from $144,000 in 2019 to $204,000 in 2022. However, younger households saw less growth in their 401(k)/IRA balances, with those aged 45-54 experiencing a below-inflation rate increase and balances for the 35-44 age group actually decreasing.
The analysis also revealed an uneven distribution of gains across income levels, with the middle quintile of earners seeing an increase in both balances and plan participation rates. Conversely, the lowest two quintiles either experienced a decline in balances or a sharp drop in the percentage of households with a 401(k) plan. Overall, despite a relatively strong economy and stock market gains, the SCF depicts a somewhat disappointing scenario for retirement assets among working households, half of whom rely solely on Social Security. This underscores the critical importance of ensuring the solvency of Social Security as a key component of retirement planning for a significant portion of the population.

Current CD Rates by term length

Term LengthRate (APY) Dec 18thRate (APY) Dec 25thChange
3 months6.00%6.00%No Change
6 months5.79%5.79%No Change
1 year5.70%5.70%No Change
18 months6.00%6.00%No Change
2 years5.29%5.39%+0.10%
3 years5.60%5.23%-0.37%
4 years5.00%5.00%No Change
5 years5.35%5.35%No Change
10 years4.00%4.00%No Change
In 2023, the Federal Reserve implemented several rate hikes, with notable increases of 0.25% in both March and May, bringing the federal funds rate to a target range of 5.00% – 5.25%. These hikes were part of the Fed’s strategy to manage inflation and stabilize the economy. As a direct consequence, CD (Certificate of Deposit) rates were influenced, with financial institutions adjusting their offerings 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

In 2023, the Federal Reserve took decisive action in response to the evolving economic landscape by adjusting its interest rates multiple times. These hikes were part of the Fed’s strategy to manage inflationary pressures and stabilize the economy. Starting in February, the central bank initiated a series of rate increases, signaling its intent to ensure sustainable economic growth. By July, the cumulative adjustments brought the rate range from 5.25% to 5.50%. These moves reflected the Federal Reserve’s commitment to maintaining monetary stability and its proactive approach to addressing economic challenges.
DateRate Increase (basis points)New Rate Range
February 1, 2023254.50% – 4.75%
March 22, 2023254.75% to 5.00%
May 3, 2023255.00% to 5.25%
July 26, 2023255.25% to 5.50%

How does the Fed rate affect CDS?

Direct CorrelationCD (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 ResponseWhile 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 DepositsWhen 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 ImpactThe 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.

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

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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.

Pro Tip

“Recent trends in CD rates and their implications: These trends reflect broader economic changes, which can impact individual savers and investors. It’s essential to stay informed about the latest rates and market conditions to make informed decisions.External factors that might impact these rates include the Federal Reserve’s decisions on the federal funds rate, inflation, and competition among banks and credit unions.” – Sammie Ellard-King, Founder – Up The Gains

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 TypeCharacteristicsExample
TraditionalCommon CDs with fixed interest over a set period.Deposit $1,000 for six months at 3% annually; get back principal plus interest.
Bump-upTraditional 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-upRates 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-couponBought at a discount; no periodic interest but receives par value at end.Buy a $985, two-year CD; get $1,000 at maturity.
CallableFixed-rate, but banks can buy back early, especially if rates drop.Buy a two-year, 3% CD callable after one year; bank can repurchase if rates drop.
BrokeredSold via brokerage; allows diverse CD holdings in one account.Open a brokerage account and buy various CDs through it.
High-yieldTraditional CDs with higher yields.Buy a two-year CD at 3.5% when others offer 2.75%.
JumboRequires 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-onAllows additional deposits during its term.Start a two-year CD at 2% with $1,000; add $500 semi-annually.
Foreign currencyUses 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

  • CD market stability is evident with minor rate fluctuations noted in the 2-year and 3-year term lengths during the week of December 25th.
  • The Federal Reserve’s rate hikes in 2023 are directly influencing CD rates, aligning with efforts to curb inflation and stabilize the economy.
  • The Federal Reserve’s survey points to a disappointing trend in retirement savings, with older, higher-income households faring better than younger and lower-income groups.
  • Diverse CD options are available for investors, and the national average CD rate is a composite that may be driven higher by competitive rates from online banks.

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

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