Interest Rates and CD Rates

CD rates go up when interest rates go up which are tied to the economy. When the economy is strong and inflation goes up interest rates are raised by the Fed so inflation doesn’t get out of control.

When the economy cools the Fed lowers interest rates to help the economy expand again and help the housing market with lower mortgage rates. When the fed increases or lowers rates banks do the same on deposit accounts like certificates of deposit and savings accounts. Likewise mortgage interest rates move higher as well.

The past four years the average CD rates for 1 year certificates of deposit has been less than 1%. CD rates at banks, credit unions and brokerage houses are all very low.

If you have the money you can invest in a jumbo certificate of deposit, jumbo CD rates have higher CD rates than regular CD rate accounts. With a jumbo CD you usually have to invest at least $100,000 to earn the rate and yield.

Don’t expect CD rates to go higher unil  the economy picks up. The best CD rates at banks on 2 year CDs is around 1.50%. The best CD interest rates on 5 year CDs isn’t much higher at 2.50%.

When investing in CD accounts you should always invest in certificates of deposit that are insured by the FDIC. If you invest with a credit union made sure the CD account is insured by the NCUA. Brokerage accounts should be insured by the SPIC.