The Fed Is Frozen—Yet CD Rates Have Been Quietly Climbing

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The Federal Reserve hasn't changed interest rates at all this year. Last fall, the central bank lowered its benchmark rate three times, for a total reduction of 0.75 percentage points. But it has held rates steady at every 2026 meeting so far.1

Ordinarily, a paused Fed would translate into stable CD rates. But that's not what's happening right now.

One reason is that expectations for future Fed policy have shifted. Earlier this year, financial markets expected we'd see further rate cuts in 2026. But the outbreak of the Iran conflict changed the inflation outlook, driving oil and gas prices higher and raising concerns that inflation could remain elevated for longer. As a result, markets now expect the Fed to keep rates unchanged for much longer than previously anticipated, with forecasts even suggesting possible rate hikes.2

That matters because certificate of deposit (CD) rates aren't based only on today's interest-rate environment. Banks and credit unions also consider where rates may be headed. With market forecasts suggesting rates could remain elevated for years—and possibly move higher in the future—some institutions are willing to offer especially attractive CD yields now in hopes of attracting deposits before rates potentially climb even higher.

Competition is certainly playing a role as well. For smaller banks and credit unions, a top-tier CD rate can be one of the fastest ways to attract attention—and deposits. As savers increasingly compare rates online, some institutions sweeten their offers simply to stand out in a crowded marketplace.

If your savings earns less than inflation, its buying power shrinks over time. Many CDs still trail inflation's recent 3.8% pace, but shoppers who seek out a top-paying CD can come out ahead.

The upward rate trend is hard to miss. In every major term from 18 months to 5 years, you can score a higher CD rate today than you could on April 1.

The improvement in longer-term CDs is particularly noteworthy because it marks a change from what savers have seen for much of the past two years. The highest yields had been concentrated in terms of 1 year or less, but now longer maturities are becoming increasingly competitive as banks and credit unions adjust to a higher-for-longer rate environment.

One dramatic change at the short end of the market involved the leading 6-month CD. The top rate in that term fell after a promotional 5.00% APY offer expired at the end of May. But since that certificate was limited to a maximum deposit of $5,000, it was not a great fit for savers looking to put larger balances to work.

For savers who have cash they won't need for a while, today's CD rates remain compelling. Dozens of the nation's best CDs continue to offer returns above 4%, giving savers an opportunity to lock in a historically strong yield with virtually no risk. And once a CD is opened, your APY is guaranteed for the entire term, regardless of what happens with the Federal Reserve, financial markets, inflation, or geopolitical events.

Of course, there's no guarantee today's rates are the best we'll see. If inflation remains elevated and the Fed ultimately raises rates, CD yields could move higher in the future. But nobody knows whether that will happen—or, if it does, how much higher rates might go. Even a future increase of 0.25 or 0.50 percentage points may not be enough to outweigh the benefits of earning a strong return starting today.

For savers who don't want to make an all-or-nothing decision, splitting funds among multiple CDs can be a useful strategy. Some people build a CD ladder with certificates of different maturities, while others invest a portion of their cash now and keep some funds available for future opportunities. Either approach can help you earn a competitive return today while preserving flexibility if rates move higher later.

For savings you don't want to lock away in a CD, you can still outearn today's high inflation rates by putting the money in a top high-yield savings account, where APYs also exceed 4%—and reach as high as 5%.

Investopedia tracks rates from more than 200 banks and credit unions each business day to identify top-paying accounts nationwide. Institutions must be federally insured and meet minimum deposit and availability criteria. Read our full methodology for details.

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