The Evolution of CD Interest Rates Through the Decades

Katie Miller is a seasoned consumer finance authority with nearly 20 years of leadership in managing extensive mortgage, credit card, and savings portfolios globally. Her expertise sharpened significantly after the 2008 financial crisis, particularly through implementing the regulatory reforms mandated by Dodd-Frank.

Certificate of Deposit (CD) interest rates fluctuate in response to the broader economic climate. The years 2022 and 2023 marked an exceptionally favorable period for CD investors, with rates soaring above 6% nationwide — a peak unseen in over a decade and a half. Historically, however, CD rates have swung widely, from nearly zero to impressive double-digit figures, reflecting the economic conditions of their times.

Key Insights

• CD rates closely track the federal funds rate, the Federal Reserve’s primary tool for inflation control. When the Fed hikes rates, financial institutions typically raise CD yields.
• The 1980s saw double-digit CD rates amid rampant inflation, which then eased during the 1990s and early 2000s.
• During the Great Recession, CD rates plummeted near zero for nearly ten years, a trend that recurred during the initial years of the COVID-19 pandemic.
• Late 2023 witnessed CD rates reaching record highs following the Fed’s federal funds rate increases to levels not seen since 2001.
• In 2024, rate cuts by the Fed led to a gradual decline in CD rates, which have since stabilized through early 2025.

Tracing the Journey of CD Interest Rates

CD rates are intrinsically linked to the Federal Reserve’s inflation management strategies. Here’s a closer look at this relationship.

The Federal Reserve convenes every six to eight weeks to adjust the federal funds rate, its chief mechanism for influencing inflation. Raising this rate aims to cool inflation, while lowering it supports economic growth when inflation is under control.

Adjustments to the federal funds rate ripple through the financial system, impacting the interest rates banks and credit unions offer on deposits, including CDs. An increase prompts higher CD rates, while a decrease generally leads to lower yields.

Given this interplay, CD rates historically mirror inflation trends, rising and falling in tandem with economic cycles over the decades.

Double-Digit CD Rates of the 1970s and 1980s

Monthly data on 3-month CD yields has been recorded since the mid-1960s, revealing remarkable fluctuations. Notably, the 1970s and 1980s featured periods where CD yields soared into double digits.

The 1980s stand out as a golden era for CD investors, with annual percentage yields often exceeding 10%. In December 1980, 3-month CDs peaked at an extraordinary 18.65% — nearly triple the highest rates seen in 2023.

This surge was driven by severe inflation, which exceeded 10% annually from 1979 to 1981, peaking at 14.8% in March 1980. The Federal Reserve responded by sharply raising interest rates to counteract rising prices.

Moderation in the 1990s and Early 2000s

Following aggressive rate hikes in the late 1980s, the Fed successfully subdued inflation, ushering in a period of more moderate CD rates through the 1990s and early 2000s.

The early 1990s marked a transition from volatile high rates to stability. In 2000, the Fed raised rates to the mid-6% range, with 3-month CD yields reaching 6.73% in June.

After a dip caused by the dot-com bust, CD rates climbed again to about 5.5% by 2006-2007, just before the onset of the Great Recession.

The Great Recession’s Impact on CD Yields

The 2007 financial crisis drove the Fed to reduce the federal funds rate to near zero by December 2008, causing CD rates to collapse and remain low for nearly a decade.

The Fed maintained this near-zero rate until December 2015, when it cautiously began incremental increases. Even after several hikes, rates remained modest, with 3-month CD yields peaking at 2.69% in November 2018.

COVID-19 Pandemic and CD Rates Plummet Again

The pandemic triggered another sharp cut in the federal funds rate to 0% in early 2020, keeping CD yields between 0.09% and 0.20% through 2021.

Post-Pandemic Surge in CD Rates

Inflation surged over 9% in June 2022, the highest in over 40 years, prompting the Fed to raise rates swiftly—adding 4.25 percentage points in 2022 alone, followed by further hikes in 2023.

This rapid increase pushed 3-month CD yields to 5.49% in 2023, matching levels from 2007.

Short-term CDs outpaced longer terms during this period, as financial institutions anticipated future rate declines and preferred not to lock in high rates long-term.

Recent Fed Rate Cuts and CD Rate Trends

In late 2024, the Fed implemented three rate cuts totaling one percentage point, leading to a gradual decline in CD rates. However, with rate pauses in early 2025, CD yields have remained relatively stable.

Looking Ahead: The Future of CD Interest Rates

Forecasting CD rates involves uncertainty, as Federal Reserve decisions depend on evolving economic factors, including inflation, global trade tensions, and unexpected crises.

Currently, trade disputes and tariffs contribute to market unpredictability, with the Fed adopting a cautious 'wait-and-see' stance.

Market expectations lean towards further rate cuts in 2025, suggesting that locking in current CD rates may be advantageous before potential declines.

Frequently Asked Questions

What Are the Best CD Rates Available Today?

For the latest top CD rates, consult daily updated rankings that track over 200 federally insured banks and credit unions nationwide. Comparing these with high-yield savings accounts can help you choose the best option for your needs.

What Was the Highest CD Rate Ever Recorded?

The highest documented 3-month CD yield was 18.65% in December 1980. Since 1990, the peak has been 8.42%.

When Did CD Rates Peak Historically?

CD rates hit double digits during the inflation-heavy 1980s. More recently, the 2022-2023 period saw rates climb above 6%, the highest since the mid-2000s.

What If I’m Concerned About Locking Funds in a CD?

If you’re hesitant about committing to a CD term, consider high-yield savings accounts for liquidity, shorter-term CDs, or diversifying by placing only a portion of your funds in CDs.

How Do Recessions Affect CD Rates?

Recessions often follow Fed rate hikes and may lead to rate cuts, which can lower CD yields. However, CD rates primarily respond to federal funds rate changes rather than recessions directly.

Our Approach to Identifying Top Savings and CD Rates

We monitor daily rate data from over 200 FDIC- and NCUA-insured institutions offering CDs and savings accounts nationwide. To qualify, banks must operate in at least 40 states, and credit unions with high membership fees are excluded. Minimum deposit requirements for our rankings do not exceed $25,000. For more details, see our full methodology.

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