URGENT UPDATE: Savers are on high alert as financial experts predict a potential drop in certificate of deposit (CD) interest rates this fall. Current rates hover between 4% and 4.5%, but uncertainty looms as the Federal Reserve prepares for its next meeting in September 2025.
What does this mean for your savings? Analysts warn that if the Fed cuts rates, which some policymakers are advocating for, CD rates could decline by 25 to 50 basis points by year-end. This is crucial for those considering locking in rates now while they still can.
Christopher Hodge, chief economist at Natixis CIB Americas, forecasts that average 12-month CD rates will start to decrease by late September. He emphasizes that the Fed’s decision to cut rates will play a pivotal role in this shift. Meanwhile, Matt Gentzkow, an investment strategist at Waddell & Associates, corroborates this outlook, indicating that while rates may remain decent this fall, they are likely to trend downward.
The backdrop of this forecast is significant. Inflation data reveals consumer prices rose 2.7% over the past year, remaining above the Fed’s 2% target. With the Fed maintaining interest rates between 4.25% and 4.5% during their last meeting in July, the upcoming decision could greatly impact savers.
Experts are advising immediate action. Hodge states, “If your goal is to secure the highest guaranteed yield, now is the safer bet.” The uncertainty surrounding economic growth and employment, with unemployment rates potentially rising to 4.8%, adds pressure on savers to act quickly.
Potential scenarios for CD rates this fall include a significant cut if economic indicators worsen. However, a stable job market could maintain current rates, as Kenneth Ceonzo from Ridgewood Savings Bank suggests. The interplay between Treasury yields and Fed policy will ultimately dictate these changes, but the consensus is clear: locking in a rate now may be wise.
The bottom line? Experts recommend a CD ladder strategy to maximize returns. This involves allocating funds across short- and long-term CDs to mitigate risks associated with falling rates. Avoid locking in money for extended periods, as early withdrawal penalties can negate potential earnings.
As the September Fed meeting approaches, this evolving situation holds significant implications for savers. Stay tuned for updates and be prepared to act swiftly. The time to secure a high CD rate is NOW.