The Federal Open Market Committee (FOMC) announced its decision to lower the target range for the federal funds rate again in December by 0.25% after its Dec. 10 meeting. The move lowers the interbank overnight rate from the Federal Reserve by a quarter percentage point, to a range between 3.50% to 3.75%.
Three FOMC members dissented on a 25-bps decrease, which hasn’t happened since September 2019. Savers will note that FOMC members disagreed as well about future levels of inflation. The question of transitory versus entrenched inflation showed up again in FOMC discussion about monetary policy.
Given the split nature of the latest FOMC vote, savings investors couldn’t be blamed for wondering:
- Is now the right time to use a certificate of deposit (CD) to lock in my interest rate – potentially for the long term?
- What would a “good” rate be if you did lock in funds in a time investment, such as CDs or U.S. Treasuries?
On the two questions above, we can make this observation in December 2025: Current bank and credit union rates for certificates are strong relative to U.S. Treasuries of similar term, especially for maturities of a year or less.
Today’s Rates: A Look at the Listings on CD Valet
Institutions offer rates for 12 months that currently beat U.S. Treasury rates, according to CD Valet’s Market Intelligence Tool. A 12-month T-bill yielded 3.51% on Dec. 16; a 24-month note yielded 3.48%.
The top three banks, Kennett Trust Bank, New Republic Bank, and FinWise Bank, are now offering rates of 4.10% or more for 12-month CDs.
The top three credit unions, I AM Federal Credit Union, Daniels-Sheridan F.C.U., and Scott Associates Credit Union, offer rates at or above 4.85%. Visit CD Valet for the most current rates.
Given that a rate higher than 4.00% is still a very strong offer for a CD, especially compared to the past 15 years, some depositors are moving now to lock in for terms of a year or less.
Here’s the economic perspective that informs a decision like that.
Economic Outlook: Strongly Differing Views
The Federal Reserve focuses on maximum employment and price stability when determining monetary policy.
“Available indicators suggest that economic activity has been expanding at a moderate pace,” the FOMC statement says. “Job gains have slowed this year, and the unemployment rate has edged up through September. More recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated.”
In the press conference that followed the FOMC meeting, Federal Reserve Chair Jerome Powell said, “We are well positioned to wait and see how the economy evolves,” which CNBC notes is a similar statement to the one made by Powell the last time he “signaled that the committee likely was done cutting for the time being.”
So what should savers anticipate about the future of deposit rates?
After the November FOMC meeting, forecasts about deposit rates contained wider potential for variation on the future path of interest rates. The continued, unusual levels of dissent signal wider optionality for the future. Given other data from the banking industry, the direction of interest rates feels as uncertain as 2020 when economists were debating transitory versus systemic inflation.
Inflation Remains Stubbornly Elevated
Since May, the Federal Reserve Bank of Atlanta data on sticky prices (less food and energy) have remained above 3.15%. While it peaked at 3.41% in July, it still has not declined below even 3.30% as of the latest data published in September.
Kansas City Fed president Jeff Schmid explained his dissent from the FOMC rate decreasing saying, “inflation remains too high, the economy shows continued momentum, and the labor market – though cooling – remains largely in balance. I view the current stance of monetary policy as being only modestly, if at all, restrictive. With this assessment, my preference was to leave the target range for the policy rate unchanged at this week’s meeting.”
Chicago Fed president Austan Goolsbee, who also dissented, said he was “uncomfortable… assuming that what we’ve seen in inflation will be transitory” when “the last six months have shown no progress” back below the 2.00% target.
The FOMC majority focused on softening employment markets.
Employment: Softening Modestly
The latest report from the Labor Department on claims for jobless benefits reported a marked jump in December to 236,000 for the week of Dec. 6. The last report from Nov. 29 was 192,000 claims, a low-point for the prior 12 months. Still, the latest claims levels are not the highest reported at many points in 2025, such as the Sept. 6 peak of 264,000 claims.
Yet, when looking at the last 12 months, the latest unemployment rate of 4.60% reported by U.S. Bureau of Labor Statistics is a high-point for the year. The economy has not had that level of unemployment since 2021. (Source: Reuters)
A “good part of the slowing likely reflects a decline in the growth of the labor force, due to lower immigration and labor force participation, though labor demand has clearly softened as well,” Chair Powell said at the FOMC press conference on Dec. 10.
GDP Estimates Declining
The Federal Reserve Bank of Atlanta’s GDPNow model now estimates real GDP growth for 2025 (seasonally adjusted annual rate) at 3.50% for third quarter as of Dec. 16, a decline from the 4.00% projection released on Nov. 6.
The downward move in the GDPNow forecast came from US Census Bureau and US Bureau of Labor Statistics reports that consumer spending and inventory investment fell slightly.
Bottom Line
The U.S. economy is showing mixed signals:
- The employment picture is softening, but Chair Powell is not raising the alarm
- Dissenters from the December rate decrease express serious concern about non-transitory inflation, and
- Inflation levels remain elevated above the Fed’s 2.00% target
- Projections for 2025 GDP growth remain healthy, though not as high as fall projections
For CDs, which have a fixed term and locked-in rate, the question most savers ponder is: Open a CD now or wait?
Waiting continues to have more downside risk to yield than it does upside.
If employment continues to decline and the U.S. economy enters a recession, the Fed may respond by returning the Fed Funds rate to the lows of 2020. In any case, waiting to open a CD could mean missing out on yield.
However, inflation poses greater uncertainty now than it did a month ago. If the Fed ends up needing to use interest rates to combat stubbornly high inflation, opening a CD now may mean missing out on a higher rate. Rates, however, would need to rise substantially before the difference is more material than the change caused by a recession scenario.
A perspective: Opening a CD now reduces the risk of missing out on yield; choosing maturities shorter than 12-18 months can offer higher returns than U.S. Treasuries; and shorter terms allow for repricing at maturity. Together, these factors help address current uncertainty around the future path of rates.
For those who have made similar conclusions about the current landscape, consider reviewing current 12-month CD rates from banks or credit unions near you, or check out these featured CDs with direct online account opening, available nationwide.
Stay ahead of rate changes and find the nation’s best CD offers with CD Valet
Financial institutions can also view and compare their data using CD Valet’s Market Intelligence Tool, which aggregates certificate data from 4,164 U.S. banks and credit unions. Contact Jamie Fairbanks at jfairbanks@cdvalet.com to subscribe to that tool.
