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Why you should open a CD even as the Fed continues to cut rates
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After an aggressive rate hike campaign in which Americans saw the federal funds rate rise from near zero to over 5%, the Federal Reserve is positioned this week to issue its second rate cut of the year. Following a 50 basis point cut in September, the federal funds rate dropped to a range between 4.75% to 5%. And after the Fed concludes its November meeting, that rate is widely expected to fall to a range between 4.50% to 4.75%. While a 25 basis point reduction will have a minimal effect on borrowers, it could cause many savers to reconsider their options, if they haven’t already.
In this climate, many savers may be pondering the benefits of opening a certificate of deposit (CD) account, specifically. Rates on these accounts surged in recent years alongside the federal funds rate, giving savers a safe and effective way to earn a significant return on their money. But now, with the second rate cut in three months set to be issued (and another likely for when the Fed meets again in December), some may be wondering if a CD is still worth opening. Below, we’ll break down three reasons why you should consider opening one now, even as the Fed continues to cut rates.
See how much more you could be earning on your money with a top CD here.
Why you should open a CD even as the Fed continues to cut rates
Not sure if it’s worth opening a CD in the face of looming rate cuts? Here are three reasons why it may still be worth doing right now:
Rates are still elevated (if slightly lower than what they were)
Sure, rates are falling. But they haven’t dropped so dramatically to render CD accounts useless. Remember, CD interest rates follow what the Fed does but they don’t mirror it directly. As such, you can still find a CD with a rate close to 5% right now. And additional cuts in the form of 25 basis points will have a small but gradual influence on the savings rate climate, meaning that it will take time for CD rates to significantly decline. Now is not yet that time.
Your money could use the extra layer of protection
With interest rate cuts being issued, unemployment data uneven, inflation falling and geopolitical tensions and concerns over the U.S. presidential election prominent, there are a variety of factors contributing to economic volatility right now. In circumstances like these, then, it’s beneficial to add an extra layer of protection for your money.
And a CD, with its fixed interest rate, can offer just that. Not only will you not need to worry about adverse market conditions affecting your CD account, you’ll also be able to budget with accuracy by knowing exactly how much interest you’ll earn upon account maturity.
Your window of opportunity is (slowly) closing
This may seem obvious but is worth reiterating. The window of opportunity to earn today’s elevated rate is closing. It’s important to remember that CD rates were under 1% just a few years ago. And while no one is predicting that rates will fall that low anytime soon, as noted above, they are on a downward path.
It doesn’t make sense, then, to wait for rates to fall further, particularly if you have a sum of money that you can comfortably afford to deposit into a CD right now. Just remember to only deposit an amount that you can leave in the account until maturity or you’ll risk having to pay a costly early withdrawal penalty to regain access.
The bottom line
CD account rates are on the decline, but not so dramatically or so rapidly that savers can’t still earn a major return on their money right now. But with another rate cut likely in just days and additional ones possible for December and into 2025, savers should act promptly before this window of opportunity fully closes. It took years, after all, for these CD rates to rise as high as they currently are. It makes sense, then, to open one while you still can.
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Leonard Glenn Francis, a former defense contractor convicted for masterminding an unprecedented bribery and fraud scheme targeting the U.S. Navy, was sentenced Tuesday in federal court to 15 years in prison. He was ordered to pay $20 million in restitution and a $150,000 fine, the Department of Justice announced.
Francis, known as “Fat Leonard,” pled guilty in 2015 to the bribery and fraud charges, but fled the U.S. in 2022 leaving his GPS ankle monitoring bracelet in a water cooler just days before he was to be sentenced. The U.S. Marshals Service told CBS News Francis was detained on an Interpol red notice at Simon Bolivar International Airport in Venezuela while boarding a flight to Cuba.
He was returned to the U.S. last year as part of a large prisoner swap deal with Venezuela. Ten American detainees were released in the 2023 deal in exchange for the Biden administration freeing Alex Saab, a Colombian-born businessman and close ally of Venezuelan President Nicolás Maduro who was facing money laundering charges.
U.S. Marshals Service via AP
In a 2015 plea agreement, Francis, the Malaysian owner of a ship servicing company in Southeast Asia, identified seven Navy officials who had accepted bribes and acknowledged paying off officials with hundreds of thousands in cash, as well as luxury goods worth millions.
He supplied them with prostitutes and Cuban cigars, luxury travel, Spanish suckling pigs and Kobe beef. Officials received spa treatments, top-shelf alcohol, designer handbags, leather goods, designer furniture, watches, fountain pens, ornamental swords and handmade ship models, according to court documents.
In exchange, officers gave him classified information and even redirected military vessels to lucrative ports for his Singapore-based ship servicing company. Francis, according to prosecutors, overcharged the U.S. military by $35 million for his company’s services.
Over 30 Navy officers and contractors have either been convicted or pleaded guilty to charges related to Francis’ services.
On Tuesday, U.S. District Judge Janis L. Sammartino sentenced Francis to a 164-month sentence for bribery and fraud and 16 months for failing to appear, to be served consecutively.
“Leonard Francis lined his pockets with taxpayer dollars while undermining the integrity of U.S. Naval forces,” said U.S. Attorney Tara McGrath in a statement. “The impact of his deceit and manipulation will be long felt, but justice has been served today.”
Francis, 60, was initially arrested in San Diego on September 16, 2013, and remained in pretrial custody until December 18, 2017, when the court granted his request for release pending sentencing due to a medical condition, the Department of Justice said. Francis served four years and three months in custody before he was released on bond and ordered into house arrest. He remained on bond under the supervision of U.S. Pretrial Services for almost five years, from December 17, 2017, until he escaped.
“Mr. Francis’ sentencing brings closure to an expansive fraud scheme that he perpetrated against the U.S. Navy with assistance from various Navy officials. This fraud conspiracy ultimately cost the American taxpayer millions of dollars and weakened the public’s trust in some of our Navy’s senior leaders,” Kelly P. Mayo, the director of the U.S. Department of Defense Office of Inspector General said in a news release on Tuesday.