Prediction: Here's What the Top 5-Year CD Yields Will Be at the End of 2025

The Federal Reserve has started to cut its benchmark interest rate, but it is still early in what is expected to be a multi-year rate-cutting cycle. With the Fed starting with a more aggressive rate cut than many had been expecting, CD yields have already dropped in response.

With that in mind, here's what the latest interest rate expectations are, and what they could mean for 5-year CD yields over the next year or so.

Do you want to lock in today's high interest rates? Click here for our updated list of the best CD rates right now.

What have 5-year CD yields done since the September rate cut?

The short answer is that 5-year CD yields have moved lower since the Fed's rate cut was announced. However, the exact impact depends on each particular bank. After all, CD rates and the Fed's benchmark interest rates don't have a direct relationship, so it's up to each bank to determine how to best reflect changes in the interest rate environment in their CD rates.

Our Picks for the Best High-Yield Savings Accounts of 2024

Product	APY	Min. to Earn
American Express® High Yield Savings Member FDIC. APY 3.80% Rate info 3.80% annual percentage yield as of December 28, 2024. Terms apply. Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	3.80% Rate info 3.80% annual percentage yield as of December 28, 2024. Terms apply.	$0	Open Account for American Express® High Yield Savings On American Express's Secure Website.
Capital One 360 Performance Savings Member FDIC. APY 3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.	$0	Open Account for Capital One 360 Performance Savings On Capital One's Secure Website.
Western Alliance Bank High-Yield Savings Premier Member FDIC. APY 4.46% Rate info The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Min. to earn $500 to open, $0.01 for max APY Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website. Member FDIC.	4.46% Rate info The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.	$500 to open, $0.01 for max APY	Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website.

That's especially true for longer-term CDs, like the 5-year variety. Without turning this into an economics lesson, a key point to know is that longer-term fixed-income instruments get their rates primarily from expectations of future interest rates. However, because the Fed's September rate cut was sharper than many had expected, it's fair to say that future interest rate expectations could change.

Without further delay, here are a few 5-year CD rates from some of the top online banks, with the current yield compared with what the bank was paying in August (a few weeks before the rate cut).

• In mid-August, Discover® Bank was offering a 3.75% APY on its 5-year CD. As of this writing, it has a 3.40% APY.
• Quontic Bank, one of the highest-yielding CD issuers on our radar, was paying 4.30% on its 5-year CD a few weeks prior to the rate cut. Its 5-year CD yield has since been slashed to 3.00%.
• Synchrony Bank was paying 4.00% on its 5-year CD before the rate cut. Surprisingly, this is still Synchrony Bank's published 5-year CD rate.

Of course, this is just a small sample of the hundreds of banks that issue CDs. But it does illustrate the general trend following the Fed's September rate cut.

Fed rate cut expectations

According to the economic projection from the Federal Reserve policymakers, the expectation is a total of 150 basis points (1.50 percentage points) of rate cuts between now and the end of 2025. This would result in a federal funds rate target range of 3.25%-3.50% at that point.

What will it mean for 5-year CDs in 2025?

As mentioned, 5-year CD rates have more to do with future interest rate expectations than they do with any single rate movement. So, while this might seem like a bold prediction, if the Fed's expectations actually happen, I would expect short-term CD rates to gradually move lower, but I wouldn't expect 5-year CD yields to change much at all from the current levels.

Historically speaking, 5-year CD yields in the 3%-4% range while the federal funds rate is in the mid-3% range wouldn't be out of the ordinary. Having said that, the larger driving force behind 5-year CD yields at the end of 2025 will be the projected interest rate trajectory in 2026, 2027, and beyond.

It's impossible to project that with any degree of accuracy at this point, but the Fed's "longer run" federal funds rate projection is currently 2.90%. If it ends up being significantly higher or lower than that, I'd expect 5-year CD yields to move accordingly.