CD Rate Trends, Week of December 12: Rates flat

CD Term Last week’s highest national rate This week’s top national ratings changes
3 months 3.35% APR 3.35% APR There is no change
6 months 5.00% APR 5.00% APR There is no change
1 year 5.00% APR 5.00% APR There is no change
18 months 4.85% APR 4.90% APR +0.05%
2 years 5.00% APR 5.00% APR There is no change
3 years 4.60% APR 4.60% APR There is no change
4 years old 4.65% APR 4.65% APR There is no change
5 years 4.75% APR 4.75% APR There is no change
10 years 4.25% APR 4.25% APR There is no change
For a list of the top 15-20 rates nationwide for any time period, click on the desired time period above.

The increase in the federal funds rate on November 2 of the Federal Reserve was the sixth increase this year, and the fourth consecutive increase of 0.75%, which is the largest increase in history for the Fed. As a result, the CD rate has increased significantly since March, and may go higher in 2023.

CD rates since the end of last year haven’t just gone up, they’ve increased, and most of this week’s top CD products were sitting at four times — or more — than the mark-up was paid. best credit in early 2021. Take a 3-year CD, for example. The highest rate in December on 3-year CDs available for the country was 1.11%. Today, the 36-month premium rate boasts 4.60%.

The FDIC’s most recent monthly reading of the national average across CD terms was released on November 21. The data shows that in the past month, the national average rose in each period, in many cases by two tenths of a point or more.

Note that the “highest rate” quoted here is the highest national rate found by Investopedia in its daily rate research of hundreds of banks and credit unions. This differs from the national average, where all banks offer CDs with this term, including many large banks that pay very little interest. Therefore, the national average is always low, while the maximum rate you can get for shopping is 10 to 15 times higher.

The Federal Reserve and CD Rates

Every six to eight weeks, the Federal Reserve’s rate review committee holds two-day meetings. One of the first results of the eight meetings during the year is the announcement by the Fed whether they will raise the federal funds rate, decrease, or remain unchanged.

The federal funds rate does not directly dictate what banks will charge customers for CD deposits. Instead, the federal funds rate is the rate banks exchange when they borrow or lend their funds overnight. However, if the federal funds rate is above zero, it gives banks an incentive to look to consumers as a cheaper source of money, which they try to attract by raising stocks, money markets and CDs.

At the beginning of the pandemic, the Fed announced a priority rate cut to 0% as a way to help the economy stave off financial disaster. And for two full years, the federal funds rate has remained at that zero level.

But in March 2022, the Fed initiated a rate hike of 0.25% and said it would be the first of many. At the May 2022 meeting, the Fed has already announced a second hike, this time to 0.50%. But two of those hikes are just a prelude to larger 0.75 percent hikes that the Fed announced in mid-June, late July, mid-September 21 and November 2. .

With the latest economic data suggesting that inflation, although still high, has moderated, forecasts currently place 80% that the Fed will raise rates on December 14 will be at a lower growth rate of 0.50%.

What is the predicted trend for the CD rate?

The Fed’s five rate hikes this year are just the beginning. Raising rates is one way to fight inflation, and with US inflation still running high, the Fed is openly planning to raise interest rates. life in 2022 and possibly in 2023.

Although the Fed rate does not affect long-term debt as much as the mortgage rate, it has a direct impact on the direction of short-term consumer debt and savings rates. So, with more hikes likely to come, CD rates are likely to rise further this year and next.

That doesn’t mean you shouldn’t lock in a CD now. But it’s worth considering longer-term awards so you can take advantage of higher rates that may be available in the near future. Or consider a “step-up” or “step-up” CD, which allows you to trigger a rate increase on your existing CD if rates rise significantly.

Disclosure of fundraising procedures

Every business day, Investopedia monitors the rate data of more than 200 banks and credit unions that offer CDs to customers around the country and determines the daily ranking of the highest paying certificates. especially every major period. To qualify for our list, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the minimum initial deposit of the CD must not be will exceed $25,000.

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