You can see that CD rates were higher in 2019, when the federal funds rate was higher. When the Fed's rate drops, rates on savings accounts and loans tend to decrease, too. The Federal Reserve slashed the federal funds rate in 2020 because the US economy was struggling due to the coronavirus pandemic. The federal funds rate affects the rates you earn on your bank accounts and the rates you pay on your loans. CD rates dropped in 2020ĬD rates are largely affected by the federal funds rate, which is the interest rate banks charge when they borrow money from each other. This can be especially useful when rates are declining, as they were in 2020.Īre CD rates going to keep decreasing in 2021? Rates will probably stay low - but declines shouldn't be as extreme as they were in 2020.
Unlike other types of savings accounts, CDs pay fixed rates, so your rate won't change after you open an account. Certificates of deposit can be great savings tools if you won't need immediate access to your cash anytime soon, but you also don't want to part with your money long enough to weather the storms of the stock market.
