Why Locking in High CD Rates Now Could Outperform Future Savings Strategies

The Federal Reserve's ongoing rate-cutting trajectory has created a rare window of opportunity for savers. With the central bank poised to reduce borrowing costs further in late 2025 and into 2026, locking in today's elevated Certificate of Deposit (CD) rates could prove a more strategic move than waiting for future savings opportunities. As the Fed prepares to cut the federal funds rate by 25 basis points in December 2025, bringing the target range to 3.50%–3.75%, and projects additional easing in 2026, investors face a critical decision: secure current high-yield CDs or risk missing out as rates decline.

Current CD Rates Outpace Inflation, Offering Real Returns

As of November 2025, online banks are offering CD rates that comfortably exceed the current inflation rate. For instance, United Fidelity Bank and Citibank provide APYs of 4.25% and 4.18%, respectively, for short-term CDs. These rates dwarf the U.S. inflation rate of 3.0% for the 12 months ending September 2025, as reported by the Bureau of Labor Statistics. Even the most conservative estimates suggest that locking in a 4.15% APY (e.g., Alliant Credit Union's 1-year CD) would generate a real return of approximately 1.15% after inflation. This margin of safety is increasingly rare in a post-pandemic economy where inflation remains stubbornly above pre-2020 levels.

The advantage is amplified for longer-term CDs. Marcus by Goldman Sachs, for example, offers rates up to 4.10% APY for terms extending to six years. While the Fed's projected rate cuts could erode future CD yields-potentially pushing the federal funds rate below 3% by late 2026-current long-term CDs allow investors to "lock in" rates that may not be replicated in a lower-rate environment.

CD Laddering: A Strategy for Liquidity and Rate Resilience

A CD ladder strategy, which involves spreading funds across multiple CDs with staggered maturity dates, becomes particularly compelling in this climate. For example, an investor allocating $3,000 across 1-year, 2-year, and 3-year CDs could reinvest maturing funds into new 3-year CDs as rates evolve. This approach ensures liquidity while mitigating the risk of being locked into a declining rate curve.

Consider a scenario where an investor builds a ladder with the following terms:
- $1,000 in a 1-year CD at 4.20% APY (LimelightBank)
- $1,000 in a 2-year CD at 4.15% APY (Alliant Credit Union)
- $1,000 in a 3-year CD at 4.10% APY (Marcus by Goldman Sachs)

As each CD matures, the investor can reassess the rate environment. If the Fed has already executed its projected 2026 rate cuts, reinvesting at lower rates would be avoided. Conversely, if rates stabilize or rise slightly, the ladder allows for incremental adjustments without sacrificing returns.

The Risk of Waiting: Fed Policy and Inflation Uncertainty

The case for immediate action hinges on the Fed's projected rate path. J.P. Morgan Research anticipates two more rate cuts in 2025 and one in 2026, aligning with broader market expectations of a gradual easing cycle. If the labor market weakens further-a possibility underscored by recent employment data-policymakers could accelerate cuts, potentially pushing the federal funds rate below 3% by mid-2026. In such a scenario, today's 4.25% APYs could become relics of a higher-rate era.

Moreover, while inflation has moderated from its 2022 peak, it remains above the Fed's 2% target. A resurgence in inflation-driven by factors like energy price volatility or fiscal stimulus-could force the Fed to delay rate cuts, but this outcome is unlikely given current economic indicators. Savers who wait risk being caught in a "double whammy" of lower CD yields and inflation eroding their returns.

Conclusion: Timing Is Everything

The interplay of Fed policy, inflation, and competitive CD rates creates a compelling case for immediate action. By locking in today's high-yield CDs-particularly through online banks offering rates up to 4.25% APY-investors can secure returns that outpace inflation while hedging against the inevitability of rate declines. A CD ladder strategy further enhances this approach by balancing liquidity with the potential to capitalize on future rate shifts. As the Fed's 2026 meeting calendar looms, the window to act is narrowing. For savers seeking both security and growth, the time to lock in rates is now.