Key Takeaways
- After a historic rate-hike campaign by the Federal Reserve that pushed savings account and CD rates to their highest levels in two decades, the central bank shifted in late 2024 to a rate-cutting phase.
- The Fed’s three rate reductions so far have already pushed bank deposit rates down from their peak.
- But the central bank recently halved its predictions for 2025 rate cuts—softening and slowing the expected impact on CD and savings account rate declines this year.
- Though down from 20-year highs, the best high-yield savings accounts and top nationwide CDs still pay 4%–5% on your cash in the bank.
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How the Fed’s Recent Forecast Changes the Outlook for 2025 Savings and CD Rates
Thanks to the Federal Reserve’s historic 2022-2023 rate-hike campaign to combat post-pandemic inflation, certificate of deposit (CD) rates surged to 20-year highs in late 2023—reaching above 6%. After inflation cooled considerably in 2024, the Fed shifted to a cutting phase for the federal funds rate, with reductions in September, November, and December. This has nudged savings and CD rates somewhat lower over the last few months.
But as we turn the page to a new year, predictions for further declines in 2025 have been dialed back. That’s because the Fed shared a fresh rate outlook in mid-December, called the “dot plot.” This quarterly forecast shows 2025 rate reductions that are significantly softened from the Fed’s September outlook.
In fact, the new dot plot cuts in half the number of expected rate reductions this year. Instead of four decreases of a quarter point each, the Fed’s December forecast now predicts just two rate cuts totaling half a percentage point. That could mean the best savings and CD rates see 2025 declines of only about a half point—instead of the full percentage point we’d been bracing for.
Two rate cuts and six rate holds?
The Fed’s rate-setting committee meets eight times per year, with an interval of 6-8 weeks between meetings. If it proves true that only two rate cuts are implemented in 2025, that would mean six of the Fed’s eight meetings would result in uneventful rate holds or pauses. Across the year, two cuts in eight meetings would be a very slow pace of rate decline.
Of course, the Fed’s December forecast represents the central bankers’ predictions at a single point in time. As we move forward, each Fed rate-setting decision will be made meeting by meeting, based on real-time economic data.
In addition to the Fed’s quarterly forecast, financial markets also make predictions about where rates are headed—and they do so in real time. According to the CME Group’s FedWatch Tool, fed funds futures traders are currently pricing in a 64% chance that the Fed will make just one or two cuts in 2025, with only a 23% probability of three cuts or more.
Though Off Their Peak, Savings Accounts and CDs Still Offer Very Attractive Returns
Only time will tell whether the Fed’s moves will match December’s prediction or if the committee will alter course due to some new economic data. But if things progress close to the current expectation, 2025 will be a year of very gradually declining rates.
Still, since the momentum is only expected to be downward, this means the rates you can earn or lock in today are likely better than what will be available down the road.
So, if you have cash savings in a bank account that’s paying little to nothing, moving it to a high-yield savings account will start delivering monthly interest payments that essentially amount to free money. And the sooner you can move to one of today’s best high-yield savings accounts—which pay as much as 5.00% APY—the sooner you’ll put your savings to work.
If you can also commit to not touching some of your money for months or even years, one of today’s top-paying CDs can be an even smarter move. While savings account rates will fall along with the fed funds rate, a CD you open now will have a guaranteed rate that can’t be changed. By shopping our daily ranking of the best CD rates, you can choose from dozens of great options that pay as much as 4.85%. Some have short terms that stretch until later this year, while others promise their rate until 2026, 2027—or even as far as 2030.
But you’d be wise to act quickly, as any CD offer can vanish overnight. So as soon as you find a top CD you like, lock it in without delay so you’ll be guaranteed that rate into the future.
Choosing the Right CD Term
Opening a CD requires you to choose how long you can live without your money—and it’s a commitment with teeth. Cash out the CD before it reaches maturity, and you’ll be hit with an early withdrawal penalty. So carefully consider your financial timeline when deciding which CD term is most manageable for you.
Daily Rankings of the Best CDs and Savings Accounts
Note that the “top rates” quoted here are the highest nationally available rates Investopedia has identified in its daily rate research on hundreds of banks and credit unions. This is much different than the national average, which includes all banks offering a CD with that term, including many large banks that pay a pittance in interest. Thus, the national averages are always quite low, while the top rates you can unearth by shopping around are often 5, 10, or even 15 times higher.
How We Find the Best Savings and CD Rates
Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account’s minimum initial deposit must not exceed $25,000. It also cannot specify a maximum deposit amount that’s below $5,000.
Banks must be available in at least 40 states to qualify as nationally available. And while some credit unions require you to donate to a specific charity or association to become a member if you don’t meet other eligibility criteria (e.g., you don’t live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.
