History of CD Interest Rates

Rates on certificates of deposit (CDs) vary greatly based on prevailing economic conditions, and in 2022 and 2023, CD returns enjoyed a historically rosy period. Driven up by the Federal Reserve’s aggressive fight against decades-high inflation, the top nationwide CD rate climbed above 6%—a level not seen in at least 16 years. But looking back on CD history, we see periods where rates sat just above zero for years on end—while at other times, you could earn a remarkable double-digit interest rate on your savings.

A History of CD Interest Rates

CD rates are linked to the Federal Reserve’s attempts to keep inflation in check. Here’s how it works.

The Fed meets every six to eight weeks to set the federal funds rate. This benchmark interest rate is the central bank’s primary lever for managing inflation. When the central bank needs to tamp inflation down, it raises the fed funds rate. When inflation is stabilized near the Fed’s target, it lowers the fed funds rate.

Anytime the fed funds rate changes, it influences the rates that financial institutions are willing to pay consumers for their deposits. When the federal funds rate goes up, banks and credit unions generally raise their savings, money market, and CD rates. And when the Fed lowers its benchmark rate, financial institutions tend to reduce their rates as well.

Because inflation, the federal funds rate, and nationwide CD rates are intertwined, history shows that during various inflationary periods over the last many decades, CD rates followed a similar path of highs and lows.

CD Rates in the 1970s and ’80s Reached Into Double Digits

Historical CD rate data is available going back to the mid-1960s. That’s when data collectors began taking monthly readings for 3-month CD yields. (Data about yields for other terms didn’t become available until 2009.) Looking at rates from these long-ago decades can be surprising, as yields climbed far into double-digit territory at various points in the 1970s and 1980s.

The 1980s is largely viewed as a glorious heyday for CDs, with annual percentage yields (APYs) hovering near or above 10% for much of the first half of the decade. In December 1980, for example, 3-month CD rates reached an astonishing 18.65%—a rate that’s triple what we saw at the 2023 CD rate peak.

High CD rates in the early 1980s are attributed to the exceptionally high inflation the U.S. was experiencing at that time. During 1979, 1980, and 1981, the annual inflation reading was above 10% each year, reaching a peak of 14.8% in March 1980. The Federal Reserve aggressively raised interest rates in response to steadily rising prices.

You can see the magnitude of the Fed’s action in the graph below. During the inflationary 1970s and 1980s, the federal funds rate was pushed to a peak above 10% five times, and almost reached 20% in 1981.

The 1990s and Early 2000s See CD Rates Transition to More Moderate Levels

After its last massive rate-hike campaign in 1989, the Federal Reserve kept inflation tame for many years. While the inflation rate would still sometimes rise above the Fed’s desired target level, gone were the days of double-digit fed funds rates and CD rates.

The first half of the 1990s served as a transition period from the high-inflation/high-interest decades to a more stabilized period in the second half of the 1990s. With a new rate hike campaign in 2000, the Fed raised the fed funds rate to the upper mid-6% range. The 3-month CD yield climbed to 6.73% in June 2000.

After dipping between 2001 and 2004 due to the dot-com bust, CD rates saw a resurgent climb to about 5.5% in the summer of 2006 and 2007—just before massive economic trouble hit late in 2007.

The Great Recession Sinks CD Rates to Anemic Levels

The next big event to rock CD interest rates took them the other way. In December 2007, the Great Recession took hold, and by December 2008, the Federal Reserve had cut its federal funds rate essentially to 0%. This tanked CD rates as well, but the biggest damage came from the duration of the rate cut as much as from its magnitude.

The Fed did not begin raising its benchmark rate up from the 0% floor for a full seven years. During this long, bleak period for savers, CD rates sank exceptionally low, providing very little return on bank deposits for the better part of a decade.

The Federal Reserve finally increased rates in December 2015, but with only a 0.25 percentage point bump. And it would not raise rates again until the following December when it added another minimal quarter point. So even though the 0% rate period ended after seven years, the fed funds rate had only inched up to 0.50% at eight years.

After this, the Fed raised its benchmark rate by a total of 1.75% in 2017 and 2018, giving CD rates a slight boost. With the fed funds rate topping out this time at 2.50%, the peak 3-month CD rate during this period was 2.69% in November 2018.

The Pandemic Pushes CD Rates Down to the Cellar Again

The recovery in interest rates in 2018 was short-lived, as the arrival of the COVID-19 pandemic in early 2020 prompted the Federal Reserve to again push the federal funds rate down to 0%. With two significant decreases in March 2020, the benchmark rate was quickly cut by 1.50%, and it remained at its 0% level until March 2022.

From March 2020 through 2021, the 3-month CD rate wavered between 0.09% and 0.20%.

Post-Pandemic Rates Catapult to New Record Levels

One of the outcomes of the pandemic was a dramatic spike in inflation, which rose above 9% in June 2022. This was the highest inflation reading in more than 40 years, and as a result, the Federal Reserve jumped into action. Beginning in March 2022, it began raising the federal funds rate at a fast pace, adding 4.25 percentage points across seven consecutive increases in 2022.

The Fed didn’t stop there. It implemented four more rate hikes in 2023, tacking on another 1.00% to the benchmark rate to raise it a total of 5.25 percentage points. Its last rate increase to date was in July 2023.

This 17-month run-up by the Fed shot CD rates to a level not seen since at least 2006-2007. The peak rate for the 3-month yield in 2023 was 5.49%, the same as during the peak in 2007.

For other CD terms, we can look at Investopedia’s daily rate data for the last few years. Below you can see the best nationally available rate in the major CD terms. Back in December 2021, the top-paying CDs were offering 0.80% to 1.30% APY. Fast forward to the fall of 2023 and the peak rate for each term was four to six times higher.

You can also notice that the payoff between short-term and long-term CDs flipped as rates continued to increase. Before the Fed started raising rates, 6-month CDs paid the lowest rate of the terms, while you were rewarded with the highest rate for a 5-year CD term. This is typical in a period of stable rates.

However, once the rate hikes took hold, the returns for short- and long-term CDs inverted, with 6-month CDs offering the highest rate among terms, and 5-year CDs paying the least. The reason is that CDs represent a promise by the bank or credit union on what they will pay you in the future, and after a big run-up, the assumption is that rates will start to come back down. This makes institutions less interested in promising a current high rate for many years down the road.

Fed Rate Cuts Begin Nudging CD Rates Lower

After holding its benchmark rate at a high level for almost a year and a half, the Federal Reserve finally applied some brakes at its September 2024 meeting, and followed with reductions at the November and December meetings. With a half-point cut in September and then two quarter-point cuts, the fed funds rate was lowered one percentage point over those three meetings.

The anticipation of that began to push CD rates lower beginning in August, and then they drifted further down over the next several months. But the decline was slow and gradual—and rates remain relatively high—because the Fed stepped off the brakes in 2025, announcing rate pauses at its first two meetings of the year. As a result, CD rates have held relatively stable for the first quarter of 2025.

Where Are Future CD Rates Headed?

Whether CD rates will go up or down in the future is always a guessing game, as Federal Reserve moves are never entirely predictable until a few weeks before the committee’s next meeting. As we’ve seen, various economic developments—such as a financial crisis or a pandemic—can suddenly rear their heads and unexpectedly alter the Fed’s course and, by extension, CD rates.

Currently, the Federal Reserve is dealing with a new wild card: President Donald Trump’s globe-spanning tariff policy and the retaliatory tariffs it has triggered from other countries. The resulting trade wars have introduced a significant amount of uncertainty in the financial markets, and many economists expect the tariffs will drive inflation back up. To that end, the Federal Reserve has indicated it is currently in wait-and-see mode.

Still, financial markets are betting that multiple rate cuts will ultimately come from the Fed before 2025 ends. So locking in a CD rate today is likely a smart move, as rates may only continue dropping from here—and the reductions could pick up speed. In any case, the best advice is always to shop around to understand the current best rates and determine if one of those makes sense for your financial situation.

Frequently Asked Questions

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.

Banks must be available in at least 40 states. 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.