Forecasting the Impact of Federal Reserve Rate Adjustments on Certificate of Deposit Yields
In the world of finance, certificate of deposits (CDs) have been a steady choice for savers seeking secure returns. Despite the Federal Reserve keeping its benchmark rate steady in 2025, CD rates have remained higher than they've been for most of the past decade.
Traditionally, step-up and bump-up CDs are structured for potential rate increases during a term. However, some of the largest U.S. banks have barely moved their standard CD rates for years, regardless of Fed rate changes. This trend has opened up opportunities for other financial institutions to attract savers with competitive rates.
Various financial institutions are offering promotional rates on CDs. For instance, Betterment Cash Reserve offers a promotional rate of 4.50% with qualifying deposits, while Wealthfront Cash Account provides a limited-time promo with a 0.50% APY increase over the standard variable base APY for 3 months on up to $250K in personal Cash Accounts.
Online banks and credit unions tend to offer the highest CD rates. Discover® CD currently offers a limited time 6-month CD with a 4.20% APY and a 1-year CD with a 4.00% APY. Marcus by Goldman Sachs offers a 7-month No-Penalty CD with a 4.15% APY. Some online banks and credit unions have lowered their CD rates since January 2024, with the biggest drops occurring after the Fed's first rate cut in September 2024. However, in late July 2025, competitive rates on CDs for three-month to one-year terms remain in the mid-4% range.
The federal funds rate, which is used by commercial banks to borrow and lend money to one another, has remained unchanged since mid-2023. Higher federal funds rates may lead to higher CD rates, while lower federal funds rates can result in lower CD rates. However, the direction of CD interest rates in 2025 is uncertain due to factors like tariffs and global conflict.
Banks and credit unions have only adjusted CD rates slightly, mostly downwards. The best long-term CDs (three- to five-year terms) have rates in the high 3% to low 4% range. Despite the slight rate drops, CD rates continue to outshine the national average CD rates for one- to five-year terms, which have dipped since 2024, but more slowly than high-yield rates.
The scheduled Federal Reserve meetings for 2025 are as follows:
- January 28–29
- March 18–19
- May 6–7
- June 17–18
- July 29–30
- September 16–17
- October 28–29
- December 9–10
Each of these meetings is a typical Federal Open Market Committee (FOMC) session, lasting two days and concluding with a policy announcement and often a press conference by the Fed Chair. The decisions made during these meetings could potentially impact CD rates in the future.
In conclusion, while the federal funds rate remains steady, CD rates continue to provide attractive returns, particularly with online banks and credit unions leading the way. As always, it's essential for savers to shop around and compare rates to find the best deal for their savings needs.
[1] Federal Reserve, "2025 Federal Open Market Committee Meeting Dates Announced," press release, 26 July 2024, https://www.federalreserve.gov/newsevents/pressreleases/monetary20240726a.htm
[3] Federal Reserve, "Federal Open Market Committee Meeting Dates," accessed 26 July 2025, https://www.federalreserve.gov/monetarypolicy/fomc.htm
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