Will Today’s Record CD Rates Climb Higher in August?

It’s a lucky time to have money in savings, with bank accounts paying record rates. Not only can you easily earn more than 5.00% in a savings or money market account, but you can bump that return as high as 5.75% APY with one of the country’s top-paying certificates of deposit (CDs).

Today’s historic rates are thanks to the Federal Reserve’s aggressive campaign to tamp down inflation by raising interest rates—and they just did so again last week, raising their benchmark rate to its highest level since 2001. Will this most recent hike push CD rates even higher in August?

CD Rates Keep Climbing

The Federal Reserve began raising the federal funds rate in March 2022, with the aim of bringing down inflation that at one point had reached a 40-year high. Across 12 meetings, the Fed implemented 11 hikes, with the most recent occurring July 26. The accumulation of 5.25% in increases over 16 months is the fastest pace of Fed hikes in 40 years.

This is important for savers because anytime the central bank raises its benchmark rate, banks and credit unions are willing to pay more for customer deposits. As a result, each Fed increase in 2022 and 2023 has driven CD rates higher, with June seeing a market-leading yield of 5.50%, and then July’s top rate improving to 5.75% APY.

The rate surges can be seen across every CD term, with today’s leaders in our daily ranking of the best nationwide CDs all paying three to seven times more than what you could earn in early 2022.

We unfortunately can’t say exactly when certificate of deposit rates were last at the current levels, since no record of the top nationwide CD rates is available in distant years past. But based on the history of the federal funds rate—since it is a direct driver of bank deposit rates—we can estimate that last month’s CD yields were at levels not seen since at least 2007.

CD Rates Could Climb Higher This Month

The Fed has implemented another hike, however, and that has now pushed the federal funds rate to its highest mark since 2001. Does that mean CD rates will climb as well?

It’s certainly possible. Because the July 26 Fed rate hike was overwhelmingly expected for several weeks in advance, many banks and credit unions raised their CD rates ahead of the actual announcement. Then others have bumped up yields over the past week.

But the Fed will not meet again until September 19-20, meaning the central bank’s benchmark rate will stay put for another seven weeks at least. During that time, it’s quite likely that banks and credit unions who are hungry for funds will jockey for position as they compete to attract CD deposits. That means additional—though perhaps minor—rate increases seem probable in August.

What About After August?

We regularly warn that predicting where rates will go is really just a guessing game, as the Fed makes each rate decision independently and based on the freshest economic and financial data. Also, while the Federal Reserve sometimes offers signals about what it projects will happen at upcoming meetings, last week’s announcement provided precious little information on what to expect in September and beyond.

In his post-announcement press conference, Federal Reserve Chairman Jerome Powell said the committee has made no decisions at this time on whether to raise rates again in 2023, or if so, what timing or pace they would follow. “I would say it is certainly possible that we would raise funds again at the September meeting if the data warranted. And I would also say it’s possible that we would choose to hold steady at that meeting. We’re going to be making careful assessments, meeting by meeting,” Powell said.

If another hike in September or at the November 4 meeting does come to pass, it would probably nudge CD rates a little higher again. But at this stage, it’s much too soon to make any reliable forecasts.

Advice for CD Shoppers

Even if the Fed delivers another increase this year, it will almost certainly be for a minimal 0.25%. Compared to how high CD rates have already climbed over the last 15 months, another quarter-point increase would only be an incremental improvement.

That means it’s hard to go wrong with opening a top-paying CD right now. Even if rates inch slightly higher over the coming weeks or months, you’d still be locking in one of today’s stellar rates. And you wouldn’t have to play the timing game of trying to score the perfect peak rate.

On the other hand, those with patience and a little bit of a mind to gamble may prefer waiting to see whether the Fed implements another increase, as that could potentially lead to even higher-paying CD options down the road.

Rate Collection Methodology Disclosure

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs to customers nationwide and determines daily rankings of the top-paying certificates in every major term. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the CD’s minimum initial deposit must not exceed $25,000.

Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don’t meet other eligibility criteria (e.g., you don’t live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.