2023 Fed Rate Hike Impact: Will CD Rates Climb Above 5.75%?

Today, the Federal Reserve took a decisive step by raising its benchmark interest rate to a range of 5.25%-5.50%, marking the highest level since 2001. This move aims to combat persistent inflation and has significant implications for savers and investors, particularly those interested in Certificates of Deposit (CDs). With CD rates already at historic highs, this hike is expected to drive yields even further upward.

Federal Reserve’s 2023 Rate Hike Overview

Since March 2022, the Fed has aggressively increased rates to address inflation, culminating in seven hikes totaling 4.25% last year alone. In 2023, the pace has moderated but remains impactful, with today’s hike being the fourth this year. This rapid series of increases represents the most aggressive tightening cycle in over four decades.

How Fed Rate Changes Influence CD Yields

The federal funds rate dictates the cost banks incur to borrow money overnight, directly affecting the interest rates banks offer on deposit products. As the Fed hikes rates, banks respond by increasing yields on savings accounts, money market funds, and CDs. This correlation has led to CD rates surging up to seven times their early 2022 levels, with many offering more than 5.00% Annual Percentage Yield (APY) today.

To secure the highest returns, it’s essential to compare rates across institutions. Our daily updated rankings highlight the best CD rates available for all terms, showing clear advantages over average national rates.

Record-Breaking CD Rates in 2023

What’s Next for CD Rates After Today’s Fed Announcement?

Given that today’s rate hike was widely anticipated, many banks and credit unions had already adjusted their CD rates upward in recent weeks. The top rates have recently increased twice within seven days, reaching 5.75% APY as of last Friday.

With the Fed’s next meeting scheduled for September 20, rates are expected to hold steady for the coming two months. However, competition among financial institutions for deposits may spur further increases in CD rates during this period.

For those hesitant to lock funds into CDs, the Fed’s hike is also likely to enhance yields on high-yield savings and money market accounts.

Looking ahead, the trajectory of rates remains uncertain. It’s too early to predict whether the Fed will implement additional hikes in 2023 or if this marks the final increase of its historic tightening cycle.

Important Consideration

While waiting for slightly higher rates might seem tempting, CD rates can shift rapidly. High-yield CDs can disappear quickly once taken off the market, so it’s often wiser to secure a strong rate now rather than risk missing out while chasing the perfect peak.

Will the Fed Increase Rates Again in 2023?

The Fed’s official statement did not confirm further rate hikes but emphasized its commitment to reducing inflation to 2%. Federal Reserve Chair Jerome Powell noted that another increase at the September meeting is possible depending on economic data, but holding rates steady is also an option. He does not anticipate rate cuts occurring this year.

How We Collect and Rank CD Rates

Our daily rankings are based on data from over 200 federally insured banks and credit unions nationwide, focusing on accounts with initial deposits up to $25,000. Banks must operate in at least 40 states, and credit unions with prohibitive membership requirements are excluded to ensure accessibility. For full details, please review our comprehensive methodology.

Correction—July 27, 2023: A previous version misstated the number of Fed rate hikes in 2022. The accurate count is seven, and the article has been updated accordingly.

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