The value to consider as a component of the 2025 savings strategy is that we increased our benchmark rates 11 times in 2022 and 2023, resulting in the recent increase in the yields of competitive CDs.
The Fed has been stable so far this year, with competitive CD yields remaining relatively stable and healthy.
“The Federal Reserve has raised interest rates at the fastest pace to keep inflation down in 40 years, 2022 and 2023. Savings have seen the best returns in savings accounts and CDs in over 10 years.”
Almost 40 years ago, CDs were considered a major investment. The average annual rate (APY) for CDs over the year exceeded 11%.
However, since 2009, in the aftermath of the Great Recession, the average fee for short-term CDs has been below APY, which is less than 1%. And in the wake of the Covid-19 pandemic, the average yield of all CD terms, including five-year CDs, is below 1%.
However, in early 2022, CD rates began to rise with the start of Fed rate hikes. After APY peaked in late 2023, there were several declines as banks expected the Fed to lower its benchmark rate in 2024.
As of June 6, 2025, the average CD for one year is 2% APY. The most competitive banks offer up to 4.40% APY on CDs per year.
Let’s take a look at the background to the historical ups and downs of CD rates and the fluctuations in rates over decades.
1980s CD Rates
The United States faced two recessions in the early 1980s. That’s when the CD reaches its peak. According to St. Louis Federal Reserve data, the CD for the three-month CD in early May 1981 paid about 18.3% APY.
The reason for the extremely high interest rates in the 1980s was due to high inflation. Inflation will increase the cost of goods and services and you won’t buy much money. And while the savers enjoyed higher fees on CDs, their expenditures were hit.
“In the early 1980s, interest rates were significantly higher as the Federal Reserve, led by Paul Bollucer, used high interest rates to surround double-digit inflation,” McBride said.
1990s CD Rates
Following another brief recession in the early 1990s, things improved and inflation decreased. Overall, the decade was marked by a solid economy.
“After the recession, CD yields fell in the early 1990s, following the Fed’s efforts 10 years ago to break inflation,” says McBride. “Stable yields in the second half of the 2010 amidst sustained economic expansion.”
2000s CD rate
In the early 2000s, after the dot-com boom began to lose steam, the economy began to slow down, and the Fed lowered interest rates to stimulate the economy.
Bankrate data shows that the average annual CD yield is below 2% of APY in 2002.
In September 2009, following the global financial crisis, CDs paid less than 1% APY for an average of one year. The average CD rate over the five years was slightly higher, with an APY of about 2.2%.
Other interest rates have also fallen as central banks significantly cut benchmark rates.
“The last decade has been booked by the recession, both of which have brought record interest rates back then,” says McBride. “In the middle there was a housing boom and there was 17 interest rate hikes by the Fed that created camelback appearances in CD yield trends.”
CD rates from 2010 to 2019
With the efforts of the Federal Reserve to stimulate the economy following the Great Recession of 2007-2009, many banks washed away cash, and there was no need to raise the CD fees to get money for lending.
CD yields reached historic lows. In June 2013, Bankrate data showed that the average yields of CDs for 1 and 5 years were 0.24% APY and 0.77% APY, respectively.
“Diagram yields continued to continue years after the Great Recession as the Fed brought benchmark interest rates closer to zero amid slow economic recovery,” says McBride.
Savers began to benefit as the Fed gradually increased benchmark interest rates between December 2015 and 2018.
“The Fed started a comeback in late 2019 after raising interest rates nine times between 2015 and 2018, working to maintain what had been a record-breaking economic expansion by then,” says McBride.
The Covid-19 pandemic then struck in early 2020, causing a global economic earthquake.
“When Covid-19 shook the global economy, the Fed quickly brought benchmark rates to near zero levels, providing fuel for the recovery,” explains McBride.
CD rates from 2020 to 2023
In March 2020, the Fed made several emergency fee cuts as a result of the economic lockdown brought about by the Covid-19 pandemic. Here’s how CD rates fell in the year 2020 emergency rate reductions:
- From June 2020 to June 2021, the average 1-year CD fell from 0.41% APY to 0.17% APY.
- From June 2020 to June 2021, the average 5-year CD fell from 0.6% APY to 0.31% APY.
“When interest rates were reduced to near zero in the early stages of the pandemic, CD yields fell a new record low,” says McBride.
However, the average CD rate rose sharply over the next few years. In June 2021, the average CDS for the year was 0.17% APY, and the average CDS for the five years was 0.31% APY. In September 2023, the average CDS for the year was 1.92% APY, and the average CDS for the five years was 1.29% APY.
This is mainly because the Fed hiked 11 rates in 2022 and 2023, encouraging banks to pay more for savings products, including CDS, while encouraging them to hike 11 rates and request more loans. (Federal fund rates have an indirect effect on CDs.)
Current trends in CD rates
CD rates have since declined since the current cycle peak in November 2023 in November 2024, in anticipation of a decision to cut the fees three times in 2024. However, top CD rates and savings accounts still outweigh inflation.
“We’ve pulled back interest rates from the high levels we’ve enjoyed over the past few years, but for savers, everything’s gone,” says McBride. “Even as interest rates drop, top savings accounts and certificates of deposit should continue to pay profits beyond the foreseeable future inflation rate.”
CD yields stabilized in the first and second quarters of 2025 after FOMC voted at its first three meetings of the year to maintain its federal funding rate at its current target range of 4.25-4.5%.
Looking at the national average CD rate, you can see the relative health and stability of last year’s CD rates. The Bankrate rate survey data as of June 2, 2025 is as follows:
- The national average annual CD yield was 2% APY, but the average yield for the previous year was 2.08%.
- The national average of five years CD yield was APY of 1.72%, higher than the 1.49% rate a year ago.
Impact of the Federal Reserve decision on CD rates
Annual yields on savings products and savings accounts tend to move as Fed rates change. A drop in federal funding rates often lead to lower deposit rates in top yield CDs and savings accounts. Similarly, if federal funds charges rise, deposit rates can rise.
This relationship occurs because federal fund rates are a benchmark for the cost of money in the banking system. If the Fed increases or decreases its rate, it could affect the fees banks pay, securing deposits used to fund lending and investing activities. However, it should be noted that not all banks change their rates in response to the Fed’s movements and there are other factors that could affect their rates. Some banks, especially the major banks, will pay rock bottom fees, whatever the federal funding rates.
The impact of economic situation on CD rates
Macroeconomic conditions also affect CD rates. CD yields are often tied to federal funding rates and are not directly related to recessions, but the effects of recessions are visible.
A recession usually occurs after a series of Fed rate hikes. Following high inflation, if federal funding increases to reduce inflation, it could ultimately lead to a recession. In this case, the Fed will respond by lowering the benchmark federal funding rate. As a result, CD yields begin to decrease.
During the Great Recession that took place between December 2007 and June 2009, and for a long time, CD yields showed that aftershocks would be longer. For example, CD yields over a year were below APY of less than 0.50% for nearly eight years. During the Covid-19 pandemic, the CD rate for the year has once again approached zero for about two years.
Prediction: Where CD Rates See
Things have been stable at CD rates these days, but some experts have foreseen a downward trend towards the end of the year.
“The forecast shows the possibility of a 0.50 percentage points reduction by the end of 2025, with further reductions in 2026, said Chicacotyler, Chief Financial Officer of the Bank of California and Trusts.
Despite the potential decline, some experts expect CDs to continue to outweigh inflation. At the time of writing, the current annual inflation rate is 2.3%, but the highest CD yield for a year is 4.40% APY.
Conclusion
Despite the years of fluctuating fees, CDs have once again proven to be a valuable investment in 2024, and are worth considering savings in 2025. To get the most out of your high APY, compare top CD options and find the best rate with the right terminology that suits your needs.
*In June 2023, Bankrate updated its methodology for determining the average CD rate across the country. However, the graph data in this article is based on historical data from Bankrate’s previous methodology.