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Certificate of deposit (CD) rates are largely determined by the Federal Reserve rate. Historically, the Fed raises the interest rate on borrowed money to reduce inflation. In turn, banks raise the interest rates paid to customers who open CD accounts.
Before learning about historical rates, explore today’s best CD rates from top banks to see how much you could earn. Continue reading for an overview of how CD rates have changed over the years.
Average CD Rates From 1980 to 2023
The graph below shows the average three-month CD rates dating back to 1980. The data only provides a snapshot of historical data gathered by the Fed as rates fluctuated from month to month. Many of the downward dips seen on the graph occurred during recessions in the U.S., when the government typically lowers rates to encourage spending.
Over the last 20 years, average three-month CD rates have rarely climbed above the 5.00% mark. Current three-month CD rates are the highest we’ve seen since 5.15% in 2006 and 5.27% in 2007.
CD Rates From 1980 to 1989
The 1980s began with the highest CD interest rates in 60 years. In March 1980, six-month CD rates averaged 17.74% APY, and the rate rose to 17.98% in August 1981. At the same time, the average 3-month CD rate hit 18.65%. But these historically high interest rates were tempered by high inflation rates—13.30% in 1979 and 12.40% in 1980.
Editor’s note: The specific rates mentioned in this section might not be represented in the graph above because average annual rates were used as data points rather than monthly rates.
The 1980s also began with the worst recession in the United States since the Great Depression. In late 1982, the unemployment rate reached 11%. And with lower employment rates comes reduced deposits. Average six-month CD rates remained high, at 12.57% in 1982, but dropped to 9.28% in 1983 as inflation remained low and recovery began.
Interest rates hit 12.08% in June 1984, but the remainder of the ’80s saw interest rates averaging between 6.5% and 10.8%.
CD Rates From 1990 to 1999
At the beginning of 1990, CD interest rates were still above 8%. But that year later saw a recession, which cooled inflation and contributed to declining CD rates. The average interest rate for six-month CDs dropped to 3.76% in 1992 and 3.28% in 1993.
Editor’s note: The specific rates mentioned in this section might not be represented in the graph above because average annual rates were used as data points rather than monthly rates.
By 1994, rates rose and hovered between 5% and 5.7% and stayed there through the end of 1999.
CD Rates From 2000 to 2009
With two recessions bookending the decade, 2000 to 2009 saw large fluctuations in CD rates. The rates in 2000 averaged 6.59%, but when the dot-com bubble burst that year, causing a stock market crash, the Fed lowered interest rates below 2.00% to counter the resulting recession of 2001. Rates on six-month CDs fell to 3.66% in 2001 and 1.81% in 2002 before bottoming out at 1.17% in 2003.
Editor’s note: The specific rates mentioned in this section might not be represented in the graph above because average annual rates were used as data points rather than monthly rates.
Rates rebounded in 2005, and from 2006 through 2007 consumers enjoyed rates around 5.20% on six-month CDs. But when the Great Recession began in 2008, rates fell to 3.14%. And in 2009, as foreclosure rates rose again, six-month CD rates fell to 0.87%—the lowest rate seen in over five decades.
CD Rates From 2010 to 2019
In the wake of the housing market crash and record-high foreclosures that occurred during the Great Recession, the government helped stabilize banks by giving them large cash bailouts. These cash infusions made banks less dependent on competitive interest rates to bring in deposits.
Throughout the 2010s, interest rates on six-month CDs remained low. Between 2010 and 2012, rates averaged 0.42% to 0.44%. In 2013, rates dropped below 0.15% for six-month CDs, while 12-month CDs remained under 1.00%.
Editor’s note: The specific rates mentioned in this section might not be represented in the graph above because average annual rates were used as data points rather than monthly rates.
Unlike previous decades when short-term CDs offered competitive rates and long-term CDs paid a lower rate of return, the 2010s saw the APY on CDs flatten across all terms.
While six-month CD rates remained the same throughout 2017, 12-month CD rates continued to fall and fluctuated between 0.20% and 0.30%. The years 2018 and 2019 saw a small uptick in rates as APYs on six-month and 12-month CDs rose to 0.40% and 0.60%, respectively. At the same time, 60-month CDs rose above 1.10% and paid up to 1.22% by the end of 2018. Overall, the decade saw historical lows in CD rates.
CD Rates Since 2020
In 2020, rates remained low. As recently as 2021, large national banks were still paying rates below 0.30% on CDs, while many online banks were offering competitive CD rates close to the national rate cap.
Beginning in April 2022, the effective federal funds rate rose dramatically, from 0.33% in April to 3.08% in October. As lending rates increased in 2022, CD rates also rose through the entire year. Banks were willing to incentivize savings to capitalize on the higher loan APRs. Paired with the conclusion of the Restoration Plan for reserve requirements, banks continued to encourage savings deposits as they were required to maintain a 2% cash reserve. By December 2022, the effective federal funds rate reached 4.10%.
CD rates continued to climb throughout 2023, with the effective federal funds rate reaching 5.33% in August 2023. For the remainder of 2023, the FOMC decided to maintain the current federal funds range, ending a long string of rate hikes dating back to March 2022.
CD rates are still high, with the best CD rates topping 5.00%. Even some large national banks are paying 5.00% on short-term CDs. The best online banks are paying upward of 5.30% on 12-month CDs. However, the Federal Reserve has indicated that the federal funds rate will likely fall in 2024, so expect to see CD rates do the same.
Why Are CD Rates High?
Banks and other financial institutions follow the Fed’s lead with CD rates. The Federal Open Market Committee adjusts the federal funds rate to combat inflation. The federal funds rate is the interest rate at which banks lend money to each other, typically overnight. When the Fed raises the federal funds rate range, banks generally follow suit.
It’s important to keep perspective. Compared to the 1980s, when interest rates ranged from 12% to 15%, today’s CD rates seem exceptionally low. However, the 12% to 13% inflation rates of 1979 and 1980 coupled with mortgage rates between 7.48% and 9.78% diminished the true value of those APYs.
Will CD Rates Continue To Go Up?
There’s a good chance CD rates will continue to remain high heading into 2024 but may not increase beyond current levels. The last few FOMC meetings have ended without federal funds rate hikes, and the Fed has indicated that it will cut rates at some point in 2024.
Pro Tip
“Going into 2024, the expectation is that rates will continue at these levels, and if we see the economy begin to slow, it may prompt the Federal Reserve to begin reducing rates,” says Lawrence Sprung, Founder, Wealth Advisor at Mitlin Financial. “This would be reflected in CD rates, and we may see them begin to back off in the second half of 2024. Those who follow this belief may want to lock into longer terms with their CDs to take advantage of the higher rates today.”
Find The Best CD Rates Of 2024
Frequently Asked Questions (FAQs)
What was the highest CD rate historically?
According to the Federal Reserve, the highest CD rate was for a three-month CD term in December 1980, which reached an average of 18.65%.
Where are CD rates headed based on historical rates?
Rates on deposit accounts, like CDs, tend to follow the federal funds rate. As history has shown, when the Fed raises the federal funds rate, banks and other financial institutions typically do the same. CD rates may continue to stay at or close to current levels until the Federal Reserve reaches its 2% inflation target and lowers the federal funds rate range.
What were the interest rates on CDs in the 70s?
The average rates on three-month CDs in the 1970s ranged from 3.61% in February 1972 up to 13.90% in November 1979. Average rates on 6-month CDs during this time period ranged from 4.04% in March 1971 to 13.97% in November 1979.
