Introduction to CDs
Certificates of deposits (CDs) continue to be worth considering as a component of your savings strategy in 2026. While yields on the best CD rates are down after peaking in late 2023, they still remain well above national averages and the rate of inflation.
History of CD Rates
CD rates have fluctuated over the years, influenced by economic conditions and Federal Reserve decisions. Nearly 40 years ago, CDs were considered great investments, with the average annual percentage yield (APY) on a one-year CD over 11%. However, starting in 2009, in the aftermath of the Great Recession, average rates on shorter-term CDs were below 1% APY. The COVID-19 pandemic also had an impact, with average yields for all CD terms plunging below 1% APY.
CD Rates in Different Decades
CD Rates in the 1980s
CD rates in the 1980s reached record highs, with savers having access to double-digit yields as inflation soared. The U.S. faced two recessions in the early 1980s, which led to CD yields peaking. On average, three-month CDs in early May 1981 paid about 18.3% APY.
CD Rates in the 1990s
CD rates fell in the 1990s, with inflation much lower than in the previous decade. Following another short recession in the early 1990s, conditions improved, and inflation fell. Overall, the decade was marked by a solid economy.
CD Rates in the 2000s
CD rates declined in the early 2000s, with interest rates reduced to help jumpstart the economy following the stock market bubble. In early 2000, after the dot-com boom began to lose steam, the economy started to slow, and the Fed lowered interest rates to stimulate the economy.
CD Rates from 2010 to 2019
After the global financial crisis, CD rates fell to their lowest point in U.S. history. Toward the end of the decade, rates began rising but fell again in 2019. The Federal Reserve’s efforts to stimulate the economy following the Great Recession of 2007-2009 left many banks flush with cash, so they didn’t need to boost rates on CDs to obtain money for lending.
CD Rates from 2020-2023
As the COVID pandemic emerged in early 2020, the Federal Reserve lowered interest rates, but inflation caused a reversal of those decreases starting in 2022. In March 2020, the Fed made a couple of emergency rate cuts as a result of the economic lockdowns brought on by the COVID-19 pandemic.
Current Trends in CD Rates
CD rates have decreased from their current-cycle peak in November 2023 after the Fed’s decision to cut rates three times in 2024 and three more times in 2025. Persistent inflation and a slowing labor market influenced these moves. However, top CD rates and high-yield savings accounts are still outpacing inflation as of December 2025.
Impact of Federal Reserve Decisions on CD Rates
APYs on savings accounts and CDs tend to move when the Federal Reserve’s Federal Open Market Committee (FOMC) makes changes to the federal funds rate. This relationship occurs because the federal funds rate is a benchmark for the cost of money in the banking system.
Effect of Economic Conditions on CD Rates
Macroeconomic conditions also impact CD rates. Although CD yields are often tied to the federal funds rate and not directly to a recession, the impact of a recession filters through. A recession usually occurs after a series of Fed rate hikes. High inflation followed by an increase in the federal funds rate to lower inflation could eventually lead to a recession.
Forecast: Where CD Rates are Heading
Rates will likely continue to decline in 2026. The Federal Reserve is poised to continue the easing cycle that began in September 2024. While savers should expect smaller declines in yields than in prior years, the overall direction of interest rates is still downward.
Conclusion
CDs are still worth considering as an investment in 2026. Although the Fed did lower interest rates — after bringing them to a 23-year high — APYs on competitive CDs remain well above the current rate of inflation. To make the most of high APYs, compare top CD options and find the highest rate at the right term for your needs.
