‘If you’re trying to grab the best yields, there’s no better time than the present.’ 3 pros on where CD rates are headed in 2024

Most of the pros we spoke to agreed that towards the end of 2024, rates may dip, and so too will the payouts on CDs. “If you’re trying to grab the best yields, there’s no better time than the present. Once the Fed verbalizes that they’re done raising rates, CD yields will start to pull back and that will accelerate as the initial rate cut comes into view,” says Greg McBride, chief financial analyst at Bankrate.

More specifically, McBride thinks that CD yields will trend lower as 2024 unfolds, with the best yields at the beginning of the year. “The Federal Reserve transitioning from hiking rates in 2022 to 2023 to cutting rates at some point in 2024 will be the biggest catalyst for movement in CD yields. The extent of that movement will depend on how the economy fares and if the Fed has to aggressively cut rates due to a recession or can slowly back off under a soft-landing economic scenario,” says McBride. 

The CME FedWatch Tool, which measures the implied expectations of debt markets, speculates that rates will be cut in the second half of 2024, landing between 4% and 5% a year from now. But recent projections from the Fed suggest we might see less of a decline by next December. Without a crystal ball, it’s hard to say exactly what to expect in terms of interest rates in 2024. (See some of the highest-paying savings accounts you can get here.)

“In the second half of 2024, we forecast both average CD rate offerings and the highest rates to start moving lower,” says Bryan Johnson, chartered financial analyst and CFO at CDValet.com. For this reason, getting a CD in the next few months likely makes sense as you’ll want to take advantage of rates before they might dip. 

“It looks like the economy is not dipping into recession territory and core inflation is clearly coming down. This suggests to me that the Fed may keep rates at current levels longer than many expect. Still, I think they will be cutting rates by late 2024,” says certified financial planner Jim Hemphill at TGS Financial.

Because CDs often trail interest rates, it’s possible that CDs won’t see much decline until the latter part of next year, pros predict. With rates unlikely to lower in the near term, CD rates could remain steady in the meantime, making it less urgent to pull the trigger on a CD immediately.

Of course, it’s not just the Fed that impacts how CD rates move. “Issuers decide the rate they want to pay and while the Fed funds rate can be a factor, banks often use higher rates to entice customers to buy their CDs over those of competitors, or as a loyalty reward and incentive to their customers,” says Bobbi Rebell, certified financial planner and founder of Financial Wellness Strategies. 

What’s more, Demissew Diro Ejara, associate professor of finance at the University of New Haven’s Pompea College of Business, says, short-term CD rates are affected by the supply and demand of funds in the money market. “The main factors that affect short-term interest rates are inflation expectations, monetary policy actions such as changing the Federal Funds rate, fiscal policy and economic activities. Current rates range from around 5% to 7% depending on maturity and financial institution.” 

According to the OECD forecast, inflation is expected to come down to around 3% by the end of 2024 and to the target rate of 2% in 2025, says Ejara. “The Fed may start cutting the Federal Funds rate if economic activities slow down, otherwise, we don’t expect to see any decrease in interest rates for the next year,” says Ejara.