2025's Best 6-Month CD Offers 5.65% to Beat 4% Inflation – Secure Your Savings Now

Inflation has declined to a two-year low of 4% in June 2024, while leading CD rates surpass this benchmark nationwide.

With inflation easing to 4%, savers have a prime opportunity to capitalize on certificate of deposit (CD) rates that currently exceed inflation across various terms. Locking in a CD now could help your money grow faster than rising prices, especially with top rates reaching 5.65% on a 6-month term.

If inflation continues its downward trend, securing a high-yield CD today ensures your savings earn more over the certificate's duration without the risk of inflation eroding your returns.

Key Highlights

• Top CD rates in June 2024 outpace the current 4% inflation rate.
• Choosing a CD with a competitive rate can help your savings outperform inflation for years.
• Average national CD rates remain below inflation, offering limited protection.
• CD rates are influenced by multiple factors, including but not limited to inflation and federal monetary policies.

Can CDs Shield Your Savings From Inflation?

Certificates of deposit can act as a hedge against inflation depending on how their yields compare to inflation rates. The highest available CD rate currently is 5.65% for a 6-month term from NASA Federal Credit Union. Additionally, many CDs with terms up to three years offer rates above 4%, making them attractive options for preserving purchasing power.

CD Terms Offering Rates Above 4% Inflation

Since inflation peaked at 9.1% in mid-2023, it has steadily declined while CD rates have risen. If this trend continues, locking in a 3-year CD at 5.13% today could substantially outpace inflation, especially if the Federal Reserve meets its 2% inflation target in the near future.

Tax Considerations

Remember, interest earned on CDs is taxed as ordinary income. For example, with a 25% tax bracket, a 5% CD effectively yields 3.75% after taxes.

Even after taxes, top CD rates outperform many alternatives. High-yield savings accounts offer up to 5.12% interest but are variable and likely to decline when the Federal Reserve reduces rates. CDs offer fixed rates, providing predictable returns over the term.

However, savings accounts provide liquidity without penalties, unlike most CDs which impose fees for early withdrawals.

How Are CD Rates Determined?

Financial institutions set CD rates based on several factors:

Federal Funds Rate

The federal funds rate, set by the Federal Reserve's FOMC, influences CD rates by affecting banks' borrowing costs. The Fed adjusts this rate considering inflation, employment, and economic growth.

Inflation surged to 7.9% in early 2023, prompting multiple Fed rate hikes. As inflation eased to 4%, the Fed is expected to pause rate increases soon, potentially resuming modest hikes later in 2024.

Lending Needs and Institutional Strategies

Banks and credit unions offer CD rates based on their deposit needs. Institutions with ample deposits may offer lower CD rates, while those seeking to attract funds might provide higher yields.

Because CDs are liabilities on banks’ balance sheets, some banks keep rates low to limit liabilities, whereas others use competitive rates to attract depositors, sometimes with promotional offers.

Our Rate Tracking Methodology

We monitor rates from over 200 federally insured banks and credit unions nationwide daily, focusing on institutions available in at least 40 states. To qualify, CDs must have a minimum deposit cap of $25,000 and exclude credit unions requiring donations over $40 for membership.

Our rankings highlight the best rates across various terms, ensuring you can find competitive CD options to safeguard your savings against inflation.

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