That's typically very correlated,' adds Adams. While we're in a higher inflationary period and costs of goods are going up a lot quicker, the banks and the Fed have had to raise rates as well. 'The Fed has been raising rates to combat inflation. Louis Federal Reserve, the interest rate for a 3-month CD has gone up from around 4.61% in January 2023 to 5.44% in August 2023.Īdrianna Adams, CFP, Head of Financial Planning at Domain Money, says high inflation has been a driver for a higher interest rate environment right now. What are CD rates like in 2023?Īccording to data from the St. As a result, CD rates shifted and dropped during times like the 1981 to 1982 Recession, the Gulf War Recession (1990 to 1991), the Great Recession (2007 to 2009), and the coronavirus pandemic. When the US faced a recession, the Federal Reserve lowered rates to stimulate the economy. Hence, some of the highest CD rates in history occurred in the late 1970s and early 1980s because the Federal Reserve raised rates significantly to combat high inflation. Conversely, if rates drop, CD rates also go down.

When the Federal Reserve raises rates, CD rates rise. Generally, the Federal Reserve raises rates to combat inflation and lowers rates to encourage economic growth. CD rates are impacted by the federal funds rate, which is the interest rate banks use when lending money to each other.Īs the central banking system in the US, the Federal Reserve manages the federal funds rate.

Bank united cd rates january 2019