How will CD interest rates be impacted by the January Fed meeting?

If you were looking for a safe way to boost and protect your money in the inflationary economic cycle of recent years, a certificate of deposit (CD) account was a smart way to do it. CDs came with rates as high as 7% for select savers and those rates were fixed, meaning that they would remain the same for the full CD term regardless of what happened in the broader rate climate. But as inflation cooled over the last year, interest rate cuts were issued by the Federal Reserve and the returns savers could’ve locked in with a CD soon declined.

However, that doesn’t mean that CDs aren’t still valuable (they are). But it does mean that savers will need to be more strategic in their approach than they may have been in 2022 or 2023. And that extends to understanding the potential impact of the Fed meetings on the calendar for 2025. So, how will CD interest rates be impacted by the upcoming January Fed meeting? That’s what we’ll break down below.

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How will CD interest rates be impacted by the January Fed meeting?

In short: CD interest rates are expected to be impacted minimally, if at all, by the January Fed meeting. Most experts do not expect any change to the federal funds rate (currently at a range between 4.25% to 4.50%) at the meeting on January 28 and January 29. The CME Group’s FedWatch tool has a rate pause listed at almost 100% certainty as of the week prior. 

So CD interest rates are unlikely to rise or fall by a material amount after the meeting has wrapped. And any minor adjustments have likely already been made by most lenders since they don’t need to wait for Fed action (or lack thereof) to adjust the rates they offer to savers. That all said, now can still be a good time to open a CD. Here’s why:

Rates are still high

The days of CD rates in the 6% or even 5% range seem to be over, at least for now. But that doesn’t mean that you still can’t easily find a CD with a rate of 4.50% currently. That’s $4.50 earned on every $100 deposited and it’s guaranteed, as long as you keep your money in the account for the full CD term. And any deposit up to $250,000 is also FDIC-insured, meaning that you can experiment by depositing a large, potentially five-figure sum of money to earn a return worth thousands of dollars. All you have to do is open an account now, with rates still high.

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You can secure long-term protection

CDs come with terms as short as 90 days or as long as 10 years, giving savers a wide array of options. And while rates on short-term CDs are a bit higher currently, long-term CD rates are still competitive (think 4.50% versus 4.25%). Plus, long-term CDs, because of the extended maturity date, will result in a much larger return once the account has expired. These accounts will also protect your funds from the volatility in today’s economic climate and additional changes to come in 2025 and beyond. This long-term protection is always critical to have for your money, but especially now when the extended economic forecast is so unclear.

Alternatives won’t be as beneficial

Sure, high-yield savings accounts have rates comparable to CDs now. These accounts won’t also require savers to forego access to their funds the way CDs do. But rates on high-yield savings accounts are variable and poised to change as the rate climate evolves, meaning your earnings potential could soon decline. Rates on traditional savings accounts, at the same time, are under 1% now, meaning you could earn exponentially more with a CD of practically any term length. With alternatives like these, then, the benefits of CD accounts become even clearer.

The bottom line

CD interest rates are unlikely to be impacted by the January Fed meeting. But they’re inevitably going to adjust again, particularly if inflation cools and additional Fed rate cuts are issued. Understanding this potential, then, and knowing that CDs still offer relatively high rates, long-term protection and better returns than many alternatives, many savers would still benefit by opening one of these accounts now.

Learn more about your current CD account options here.