There are many downsides to high interest rates, but one bright side is that elevated rates can make it easier to earn more money on your savings. For example, certificate of deposit (CD) interest rates and other interest-bearing account rates are closely linked to the federal funds rate. As a result, when the Federal Reserve raises the benchmark interest rate, most banks and credit unions raise rates on savings accounts, money market accounts and CD accounts.

During the pandemic, the Fed slashed interest rates to nearly zero, and the APY on CD accounts dropped as well. In June 2021, the average 12-month CD rate was just 0.12%. But from March 2022 to July 2023, the Federal Reserve raised interest rates 11 times, and by September 2023, the average APY for a 1-year CD shot up to 1.78% — and some of the best CD rates exceeded 5.50%.

However, in the second half of 2024, the Fed lowered the benchmark interest rate several times, and CD interest rates dropped once again — and many analysts expect the Fed to cut rates again in 2025. Given these expectations, is there a chance that CD rates could increase next year or will they fall further?

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Will CD interest rates rise again in 2025? Experts weigh in

These recent shifts have left many people wondering what the new year holds for CD rates. To find out more about what the CD interest rate trends could be in 2025, we asked several experts to weigh in with their opinions. 

Yes, CD interest rates may rise again in 2025 

Aaron Cirksena, CEO of MDRN Capital, says that CD rates in 2025 will largely hinge on whether the Federal Reserve raises or lowers interest rates. 

“If inflation stays high or the economy keeps growing steadily, the Fed might hold or raise rates, which could push CD rates higher,” Cirksena says. “But, if the economy slows and rates are cut, CD yields could drop.”

However, the federal funds rate is one of several factors that influence CD rates. Competition among banks also plays an important role. When banks are looking to increase their deposits, they often increase the APY on high-yield savings accounts and CDs in hopes of attracting more customers. So regardless of what happens with the economy, you should still be on the lookout for CD bonus offers. 

“Keep an eye on those, it’s still a smart way to boost your return and keep your money safe,” Cirksena added. 

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No, CD interest rates won’t rise again in 2025 

According to Robert Johnson, chairman and CEO of the Economic Index Associates, it’s unlikely that CD rates will rise in 2025. 

“The outlook for CD rates is bearish, as the overwhelming sentiment of market participants is that rates will be markedly lower in the coming year than they are today,” he says. 

While there isn’t a perfect correlation between the Federal Reserve interest rates and CD rates, the Fed strongly influences CD rates. In general, CD rates move in the same direction as changes in the fed funds rate. 

“My advice to CD investors is to prepare for lower rates in 2025,” Johnson says.

When is the best time to open a CD account?

CDs can be a good option for anyone saving for a shorter-term financial goal, like a down payment on a house. They’re a low-risk investment, and because you agree to a specific CD term, it’s a good way to keep your money out of sight until you’re ready to use it. 

And unlike high-yield savings accounts, which have variable interest rates, when you open a CD, you lock in that rate for the full CD term. CD terms can range in length from three months to five years or more, and if you withdraw the funds early, you’ll get hit with an early withdrawal penalty. But if you leave the money for the full term, you’ll receive a guaranteed return once the CD reaches maturity.

The best time to open a CD account is usually when interest rates are high. Currently, the national average for a 1-year CD is 1.74%, but you can find APYs as high as 4.50% right now, depending on the term and other factors. 

The bottom line

Whether or not CD rates will climb next year depends on a wide range of variables, and with so many unknowns looming, it’s tough to determine what exactly will happen over time. So, if you’re interested in opening a CD, this may be a good time to lock in a high interest rate. If you wait too long, these rates could drop in the coming year if interest rates are lowered by the Fed.