With the Fed on Pause, Why Is the Top CD Rate Now Higher?

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The Fed Continues Its Prolonged Rate Pause

Between March 2022 and July 2023, the Federal Reserve aggressively hiked its federal funds rate to combat post-pandemic inflation, raising its benchmark rate to a 23-year high. After holding rates at that historic level for 14 months, the central bank finally cut the key rate in September 2024. It was then followed by additional reductions in November and December last year, dropping the fed funds rates by a total of one percentage point.

But since then, the Fed has made no further adjustments. Early this year, the reasoning was that inflation was still too high above the Fed’s target rate of 2%, making central bankers reluctant to cut rates too much and too quickly.

In April, however, President Donald Trump’s tariff policy began wreaking havoc on the economy, leading to great uncertainty on what would happen with trade, inflation, and jobs. In the almost two months since President Trump’s initial tariff announcement, the administration’s on-again, off-again policies have caused the markets to seesaw, and lagging measures on the economy have yet to register their effects.

As a result, the Fed is in no hurry to make any near-term rate moves, preferring to remain patient as it digests new economic data coming in. Though the central bankers will convene for their next meeting on June 17-18, the CME FedWatch Tool indicates that interest rate futures traders are pricing in a 96% probability that the Fed will stay put on rates once again.

Forecasting further down the road, there is no rate change predicted at the July meeting either, with the Fed’s Sept. 16–17 meeting being the first with majority odds for a quarter-point rate cut.

Despite the Hold, the Top CD Rate Has Jumped

Generally, the leading CD rates are influenced by the federal funds rate and move in the same direction. When the Fed’s benchmark rate skyrocketed to a historic high in 2023 and 2024, the top CD rates also surged. And now that the fed funds rate has drifted a bit lower, so too have CD returns.

With no Fed rate moves expected for a few months, stabilized CD rates are also a sound prediction. And from April 28 until May 26, the top CD rate in the nation held steady at 4.50%.

But on Tuesday, CD savers received some welcome—if surprising—news. Technology Credit Union unveiled a new 6-month CD paying 4.65%. That improves the top rate by a robust 15 basis points.

If this seems perplexing, it’s useful to note that banks and credit unions can use rates as a way to market and promote their offerings. A high rate can grab attention in the marketplace. Considering that as many as 16 different institutions were locked in a tie at the 4.50% leading rate for more than four weeks, Technology Credit Union was able to grab some banking headlines—and likely new customers—by offering a substantially higher 4.65% APY.

What To Expect for CD Rates in June

It’s impossible to predict how long the Fed’s rate hold will ultimately last, but it seems very likely that no adjustments will be made until at least late July. And another rate cut being deferred until September—or even later—seems very possible. At some point, the economic picture should clear up enough for the Fed to feel confident returning to rate reductions. But that time seems at least a few months away.

It’s also true that there are no rules on how long a bank or credit union needs to offer any of its CD rates. Some nation-leading CDs in the past have remained on the market for just a few days, being retired once the institution received enough deposits (or was overwhelmed by customer response). We don’t know what Technology Credit Union plans for its 4.65% offering. Nor do we know if any other players will step up their rates to similarly chase the lead, potentially giving CD shoppers another nice surprise.

How We Find the Best Savings and CD Rates

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account’s minimum initial deposit must not exceed $25,000. It also cannot specify a maximum deposit amount that’s below $5,000.

Banks must be available in at least 40 states to qualify as nationally available. And while some credit unions require you to donate to a specific charity or association to become a member if you don’t meet other eligibility criteria (e.g., you don’t live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.