The Fed Just Cut Rates -- but You Might Be Surprised by How Much CDs Are Still Paying

The Federal Reserve recently cut its benchmark interest rate for the first time since early 2020, so it might seem as if the window of opportunity to take advantage of the highest CD and savings account rates since the mid-2000s might be over. But that's simply not the case.

This was just the first Fed rate cut after a long series of rate increases, and you can still open high-yield CDs with top-rated online banks. If you're looking to lock in today's CD yields before the Fed cuts rates any further, check out our list of the best CD rates today.

The Federal Reserve and CD interest rates

To be perfectly clear, there is no direct relationship between CD rates and the Federal Reserve's rate movements. In other words, there's no rule that says a bank has to lower its CD yields if the Fed decides to cut its rate.

Having said that, they do tend to move in the same direction over time. The Fed's rate cuts make banks' borrowing costs lower, and this generally means banks are willing to pay less for deposits like CDs.

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 January 1, 2025. 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 January 1, 2025. 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 4.40% Rate info The annual percentage yield (APY) is accurate as of Jan. 2, 2025, 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.	4.40% Rate info The annual percentage yield (APY) is accurate as of Jan. 2, 2025, 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.

Short-term CDs tend to be the most sensitive to the Fed's interest rate decisions, while long-term CD yields tend to move more gradually. The simplified explanation is that shorter-term CDs are largely based on the current interest rate environment, while longer-term CDs mainly get their yields from expectations for interest rates throughout the term.

This is why 5-year CDs generally have lower yields than 1-year CDs right now -- the expectation is that interest rates are going to continue to fall over the next few years.

You can still open a high-yield CD

We've certainly seen some CD yields come down, but they really haven't dropped as much as you might expect. As of this writing, 9-month CDs with yields of 4.35% or higher are still available from some well-known and top-rated banks, and on the longer-term end of the spectrum, 5-year CD yields of 3.50% or more are rather easy to find.

It's also worth noting that if you're willing to use the absolute highest-paying banks, CD rates have barely budged since the Fed's rate cut. To be sure, the highest-paying CDs might not be the most convenient to open and manage.

For example, some have higher minimum deposits and/or have limited ways to deposit and withdraw money. But if your priority is maximizing yield, you can still find yields that are much higher than were available just a few years ago.

The bottom line

CD rates were at their highest level in years before the Fed decided to lower interest rates in September, and while their yields have fallen, they are still much higher than they were a few years ago. However, it's important to keep in mind that the Fed is widely expected to keep lowering interest rates in a series of reductions lasting for at least another year.

If it does, it's likely that we'll see CD yields gradually head lower, so if you have cash in a savings or money market account you aren't likely to need anytime soon, now could be a great time to consider a CD.