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What the Fed Will Officially Announce Next Week

The Federal Reserve will hold its second 2024 rate-setting meeting next week, and it's virtually certain the central bank will announce Wednesday afternoon that it's holding its benchmark interest rate steady once again. That would be its fifth consecutive rate hold after last raising the federal funds rate in late July.

From March 2022 to July 2023, the Fed hiked the federal funds rate 11 times across 12 meetings in a historically aggressive campaign to combat post-pandemic inflation that had reached a four-decade high. That meteoric rise in the Fed's benchmark rate—adding 5.25% over 16 months—pushed savings account and certificate of deposit (CD) rates to their highest levels in more than 20 years.

Now that inflation has cooled somewhat, the Fed has stopped hiking rates. But inflation is still above the Fed's target rate of 2%, and until the central bankers feel confident it will come down far enough—and reliably enough—they're in wait-and-see mode for the time being.

Next week's announcement is not by itself expected to have a major impact on near-term CD rates, given the Fed's decision has been widely anticipated for weeks. But in deciding how to proceed with CD rates in March and beyond, banks and credit unions will be looking closely at something more useful than the official rate decision.

The Fed's "Dot Plot" Will Be the More Important Part of Next Week's Announcement

Next week's Fed rate decision will be accompanied by some added behind-the-scenes information that's commonly called the Fed's "dot plot." Released once per quarter, the dot plot is so called because each Fed committee member is represented by a dot (no name attached) that is placed on a graph to show where that Fed member thinks the federal funds rate will be at the end of this year and the next two calendar years.

In the latest dot plot forecast, released in mid-December, almost 80% of the central bankers had penciled in two to four rate decreases by the end of 2024. The median prediction was three cuts totaling a 0.75% decrease.

But since December, multiple inflation and employment reports have been released, and inflation is proving more stubborn than the Fed and other economists anticipated. In fact, inflation data released this week showed February's reading was higher than expected, in addition to being higher than January's reading, which itself came in above expectations.

The Fed has made it clear it's looking for evidence that inflationary price pressures are sustainably under control before it will entertain cutting rates. As a result, next week's dot plot report will provide a fresh look at whether Fed committee members still expect to lower rates two or more times this year—or if the graph will show they are softening that December forecast.

What the Fed Forecast Will Mean for CD Rates

Banks and credit unions will take into account what they hear from the Fed next week as they decide how to proceed with CD rates. In addition to what they read in the Fed's statement and hear in Fed Chair Jerome Powell's post-announcement press conference, they'll especially consider what they see in the dot plot.

The reason is that, unlike a savings account, whose rate can be changed at any time, CDs are a rate promise for the future, which the bank or credit union is obligated to pay for the life of the certificate. So in deciding how much to pay for different CD terms, banks and credit unions must balance offering a rate that will successfully attract deposits while minimizing their risk of paying too much in the future. If next week's dot plot shows that Fed members are forecasting fewer rate cuts in 2024 than they previously predicted, this is likely to keep today's CD rates somewhat stabilized, as it means the fed funds rates will likely stay at its current level for several more months.

But if the dot plot shows the Fed still expects to cut rates three times before the year's out, that could cause banks and credit unions to continue lowering their CD rates, as it suggests the first rate cut may not be that far off.

Smart Strategies for CD Shoppers

Whatever the Fed's statement and dot plot tell us next week, the odds of CD rates increasing are quite slim. Though another rate hike from the central bank is not impossible—since every Fed rate decision is made based on the freshest economic data, which can't be reliably predicted—the probability is high that the fed funds rates will either remain where it is or, more likely, come down in 2024.

That means even though you may have some time to shop around and still score a rate similar to today's top yields, you run the risk that rates could fall, causing you to miss your window of opportunity to score as high a rate as possible. Dozens of options are available in our daily rankings of the best nationwide CDs to earn in the 4% to 5% range, which makes locking in as soon as possible a smart move.

If you feel compelled to wait a bit longer, one potential strategy is splitting the deposit you intend for a CD into two or three smaller amounts. You could then lock in some of your savings now and then make another one or two CD deposits later. Not only does this hedge your bets on where rates will go in the coming months, but it also lets you stagger your CD terms, allowing you to access your CD funds over a period of time instead of waiting to access the full amount all on one maturity date.

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.