As the Federal Reserve cut interest rates for the second time since December 2024 on October 29, 2025, lowering the benchmark range to 3.75%–4.00%, many savers are watching closely. This shift may be a signal that more rate cuts are on the horizon. With CDs, savings accounts, money markets, and other liquid savings facing likely downward pressure, now is the time for savers to evaluate their cash needs, risk tolerance, and savings options to maximize interest income.
The Impact of Rate Cuts
When the Federal Reserve lowers interest rates, the effects ripple across many savings vehicles. Savers can expect lower returns on savings accounts, money market funds, and short-term CDs. Over the past year, many have enjoyed top rates near or above 5.00% APY*. But in light of the new Fed move, those returns are likely to decline. CDs offer the advantage of locking in current rates, protecting your yield even as market rates drop.
Locking in Longer-Term CD Rates
One strategy to consider is locking in a longer-term CD before rates fall further.
For example, today’s top CD rates for 3, 6, 12, and 18-month terms are at or above 5.00% APY*. Meanwhile, 99th-percentile rates across many institutions fall more in the 4.25% to 4.30% APY* range. By choosing a 2- or 3-year CD today, you can lock in returns that may significantly outperform shorter-term options when rates decline further.
Reevaluating Money Market Holdings
Money market funds have been attractive when short-term rates are high, but the new Fed rate cut means those yields may drop quickly. CDs offer rate stability versus fluctuation. Unlike money market funds, once you lock in a CD rate, you keep that rate for the full term — a valuable hedge against falling rates and inflation. CDs also carry FDIC or NCUA insurance protection up to applicable limits, adding security.
The Window of Opportunity
The window to capture the best CD rates is narrowing. In light of the October 29 rate cut, many institutions will adjust their highest-yield offers downward. Now is the moment to act, especially if you have savings you can commit for a fixed term. CDs remain a smart, stable choice for those prioritizing guaranteed returns.
FAQs
How do CD rates change with the Federal Reserve’s actions?
CD rates tend to follow the direction of the federal funds rate. When the Federal Reserve lowers rates, rates on CDs usually drop, especially for new offers. Securing a high CD rate before cuts can preserve your return.
Why should I invest in a CD before interest rates drop?
By investing in a CD now — before rates fall more — you lock in a higher APY and safeguard your savings against future declines. A CD today may outperform many savings or money market options tomorrow.
What terms are most attractive right now?
Currently, the top CD rates for 3, 6, 12, and 18-month terms are at or above 5.00% APY*. Many 99th-percentile rates across institutions are in the 4.25%–4.30% APY* range. If your timeline allows, choosing a term you’re comfortable with today can help you outpace falling rates.
* APY rates are updated and accurate as of November 4, 2025.
