With the Fed about to cut, it might be time to buy a CD
High interest rates attracted a mountain of cash to high-yield savings accounts and money market mutual funds over the last couple years.
But the salad days of depositors free-riding on high short-term, risk-free returns might be coming to a close with the Federal Reserve starting a rate-cutting cycle in September, something traders think is a foregone conclusion.
Interest rates on deposits will also start falling once that happens. But fear not. Over at Barron’s, Ian Salisbury points out that savers can stretch the good times out a bit longer by locking in relatively high short term rates in a CD while they still have the chance.
You can still lock in rates of 5.25% on six-month CDs. And it’s possible to find CDs that will pay roughly 5% in interest over the next three years or so. Of course, CDs — where you have to commit to locking up cash — are different than money market and savings accounts, where you can take out your money when you want. But we might not see these high rates again any time soon, and trade-offs are part of life.
Interest rates on deposits will also start falling once that happens. But fear not. Over at Barron’s, Ian Salisbury points out that savers can stretch the good times out a bit longer by locking in relatively high short term rates in a CD while they still have the chance.
You can still lock in rates of 5.25% on six-month CDs. And it’s possible to find CDs that will pay roughly 5% in interest over the next three years or so. Of course, CDs — where you have to commit to locking up cash — are different than money market and savings accounts, where you can take out your money when you want. But we might not see these high rates again any time soon, and trade-offs are part of life.
