3 Types of CD Accounts to Consider Ahead of the July Inflation Report

The next inflation report is due out on July 11, detailing the state of inflation for June 2024. And if the report shows a further decline in inflation, as it did in the previous two months, it will once again reset expectations for a cut in the federal funds rate.

While many had Multiple rate cuts are expected earlier this year, it now seems likely that only one will come in 2024But while a single rate cut might help borrowers, it would hurt the returns savers have become accustomed to in recent years, particularly with Certificates of Deposit (CDs) And high yield savings accountsEven a hint of an upcoming official rate cut could prompt lenders to offer lower rates on these savings instruments than they have done so far.

In this context, there are compelling arguments in favour opening a long-term CD ahead of this week’s inflation report to lock in the high rates readily available today. But who CD term What are the terms that savers should consider? While the answer to this question is personal, there are compelling arguments in favor of certain terms right now. Below, we’ll analyze three of them.

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3 Types of CD Accounts to Consider Ahead of the July Inflation Report

Ready to take advantage of today’s high rates before they start to fall? Here are three types of CD accounts to consider opening before the July inflation report is released.

One year CD

Short-term CDs are considered those that mature in 12 months or less. But in today’s unpredictable rate climate, One year CD could provide the exact combination of predictability and high rates that most savers are looking for. By opening a one-year CD now, you could lock in a rate of 5% or more on your money, allowing you hundreds and potentially thousands dollars in interest earned, based on the deposit made. And your funds won’t be tied up for so long that you have to account for a early withdrawal penaltybecause many savers can afford to leave some of their money untouched for the duration of the contract. The maturity date will also allow you to explore other potentially more attractive savings options sooner than if you had locked your money away for a much longer period.

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18 month CD

Similar to the benefits of opening a one-year CD now, a 18 months one This option may also be worth considering. Savers can lock in a rate of about 5% now, allowing them to earn the same amount of interest as on the one-year CD option for an additional six months. This option is particularly beneficial for savers who want to take advantage of current high rates but want to do so for a while longer, until the impact of inflation and other political and geopolitical factors have a chance to play out across the economy.

3 year CD

3 year CD may not be matched by the rates charged by their shorter-term counterparts (a reversal of historical trends) but with rates currently hovering around 4.50% or higher, they remain an attractive way for savers to earn a high yield for years to come. While no one knows where CD rates will be in three years, recent market volatility suggests they could drop significantly (they were hovering around 1% in 2020 and 2021, for example). So for savers who can afford to leave some of their money untouched for a few years, a 3-year CD could be the way to do it. By opening one of these accounts now, savers will get a high rate for several years, regardless of how much market volatility occurs this year — or in 2025 or 2026.

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The essential

The rate environment could soon change, and CD accounts won’t be immune to these developments. With this in mind, and ahead of the new inflation report that could further impact rates on these accounts, savers should consider locking in a long-term CD rate now. With 1-year, 18-month and 3-year CDs all offering unique benefits today, savers have several ways to protect themselves against rate declines in the future. But they’ll need to be proactive and start shopping around for the best rates and terms now. The window of opportunity to take advantage of today’s high CD rates could soon be closing.