How Are CD Rates Determined?ĬD rates are determined by individual banks and credit unions, but these institutions largely base their rates on the federal funds rate. Treasuries have displayed a similarly inverted yield curve. Should interest rates fall in the future, banks don’t want to be stuck paying higher, fixed rates on longer-term CDs. Throughout the first three quarters of 2023, however, CDs with two- to five-year terms paid less than CDs with 12-month terms. In times with less volatile interest rates, the longer the CD term, generally the higher the rate. This translates to $352 to $528 in yearly earnings on a $10,000 deposit. In November 2023, this means a 12-month CD paying 3.52% to 5.28% APY.
While average CD rates remain modest, good rates tend to be at least two to three times higher. What Is the Average Interest Rate on a CD?
