Here's When CD Rates Are Expected to Drop

CD rates are still near 15-year highs, thanks in part to the Federal Reserve keeping interest rates unchanged since December. The Fed is also expected to keep rates the same when the Federal Open Market Committee meets again in May.

However, the FOMC expects to lower rates by 0.50 points by the end of 2025. When that happens, CD rates are likely to drop, too.

So when can we expect CD rates to come down? Here’s what we know.

The next interest rate cut could come in June

Markets and most analysts expect the FOMC to keep rates unchanged until its June 17-18 meeting, then make its first of two 0.25-point rate cuts for this year.

There’s a chance that the Fed will change rates sooner or later than that, though, especially since the effects of the Trump administration’s policies are still unfolding.

Further, the Fed’s actions don’t change CD rates directly — or right away.

CD rates take time to catch up

Banks set their CD rates based on many factors besides prevailing interest rates, such as:

• Demand for CDs
• The bank’s need for cash
• Competition between banks for customers

That means banks won’t necessarily lower their APYs right after the Fed cuts rates — and some may totally buck the trend.

That said, CD rates usually follow the Fed’s interest rate moves pretty closely. You can typically expect CD rates to start declining a few weeks or months after a federal interest rate cut. Based on current projections, that means new CDs could have lower rates as soon as July.

Take advantage of rates before they decrease — high-yield savings accounts included. Check out our list of the best high-yield savings accounts where you can earn 3.70% to 4.40% APY on your cash now.

Should you invest in CDs now?

CDs are a great place for money that you want to keep safe for three months to five years while earning a solid APY. If CDs make sense for you, then now is a good time to invest, because rates seem very likely to drop later this year.

If you’re ready to open a CD now, check out our list of the best CDs to get started.

Don’t rush to open a CD just because of an upcoming interest rate cut, though. Unless you’re investing a huge sum of money, near-term rate cuts won’t have a big impact on your earnings. Plus, keep in mind that there’s no guarantee that the Fed will cut rates at its June meeting (or at all in 2025).

For example, let’s say you put $10,000 in a 1-year CD, and rates paid by top CDs fall by a quarter percentage point.

• At a 4.00% APY, you’d earn $400
• At a 3.75% APY, you’d earn $375

That’s a pretty small difference, so don’t move heaven and earth to invest in CDs before you’re ready. In the meantime, there are savings accounts with APYs that rival the best CDs.