Mid-2024 CD Rate Forecast: Will CD Rates Go Up Later in 2024? (2024)

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• CD rates stayed relatively stagnant throughout the first half of 2024.
• The Fed won't lower rates until inflation hits 2%, but CD rates are still likely to fall more in 2024.
• If you want to protect against uncertainty, CD ladders can help mitigate risk.

CD rates vary widely across financial institutions. However, if you've been paying attention to the best CD rates, you've likely noticed that CDs haven't been going down as much as originally anticipated.

Will CD rates go down more significantly during the latter half of 2024? We'll go over how CD rates have performed in 2024 so far, how CD rates might fare for the rest of 2024, and how to decide if you should open a CD now or wait.

What were CD rates expected to do in 2024?

CD rates are influenced by changes in the federal funds rate. When the Federal Reserve raises rates, CD interest rates typically go up. If the Federal Reserve, or the Fed, begins cutting its rates, CD rates drop. So when people say that CD rates are expected to drop, that usually means they expect the Fed to cut its rates, too.

CD rates were extraordinarily high in 2023, and it was expected that the Fed would drop its rates in 2024. However, the Fed has kept its rates steady throughout the first half of 2024. Despite this, some banks have started lowering their rates slightly depending on CD term lengths. However, these bank-led rate lowerings have been relatively minor; you can still find plenty of CDs offering 5% interest, for instance.

The main reason Federal Reserve rates haven't dropped significantly is inflation. CD rates "were predicted to go down because we were supposed to have a handle on inflation, and we were supposed to be getting back to the Fed's target, which is the 2% inflation rate," says Malik S. Lee, CFP, founder of Felton & Peel Wealth Management.

The Fed said that inflation was around 2.7% during the June 12 Fed meeting, which is still a little above their target. The Fed isn't planning on lowering its rates until it hits 2% inflation. "It's taking a little bit longer to get there than the Fed anticipated, and that's why the rates aren't doing what the Fed was projecting that they would do last year," says Lee.

CD rate forecast for the second half of 2024

The Fed still says that its rates — and therefore CD rates — will lower in 2024. "They have been giving some indication that they plan to still possibly lower rates this year. The amount, nobody knows; I don't even think the Fed really has a strong idea on that number," says Lee.

The CME FedWatch Tool, which analyzes the probability of federal rate changes at upcoming Federal Open Market Committee meetings, also predicts lower rates later in the year. It predicts around a 90% chance the Federal Reserve could begin cutting rates around September. The CME FedWatch Tool also indicates that multiple rate cuts could still occur in the latter half of 2024, although the investment company Vanguard says the Fed will only cut rates once in 2024.

Lee says that the Fed's predictions aren't set in stone. "Although they are the individuals that control it, they also don't have a crystal ball," says Lee. "So what they're saying is not guaranteed," Lee adds.

Should I open a CD now or wait?

Knowing when to open a CD is tough, because you'll be locked into whatever rate the CD offered until the CD matures. If rates lower, you could get a great deal, especially if you take out a long-term CD like a 5-year CD. But if rates go up, you could be left with a subpar rate for a significant amount of time.

Lee says that one way to prepare against the uncertainty of CD rate predictions is to build a CD ladder. A CD ladder is a set of CDs with different term lengths that you open at the same time, so that each CD matures at a different point.

If you have a CD ladder with three CDs in it, which Lee says is a common CD ladder structure, "The theory behind it is that, if the rates go down, that is fine, because you have two instruments that are not maturing" and are locking you in to a high rate, says Lee. If the rates go up, then you still have a short-term CD, such as a 1-year CD, that you can convert to a higher rate, Lee adds.

However, if you feel comfortable trusting the Fed's predictions, you might want to lock in a high CD rate now. Just keep in mind that you'll find higher short-term CD rates vs long-term CD rates right now because banks are predicting that rates will fall soon.

CD rate forecast FAQs