Northern Bank Direct Offers 4.60% APY on Six-Month CD Amid Fed Rate Stability

As of July 8, 2025, investors have the opportunity to earn up to 4.60% annual percentage yield (APY) on certificates of deposit (CDs). This rate is currently offered by Northern Bank Direct on its six-month CD, highlighting the competitive landscape for CD rates in the market. The stability in CD yields this year is attributed to the Federal Reserve's decision to hold off on further rate changes, following three interest rate cuts in 2024. However, market expectations suggest that additional rate cuts may be on the horizon, making it crucial for investors to act promptly to secure these high rates.

CD rates are currently favorable for both short-term and long-term investments. While the APY is a significant factor, investors should also consider other aspects such as term length, penalties for early withdrawal, minimum deposit requirements, and deposit insurance when choosing a CD. Large national banks, which focus on more profitable products like loans and credit cards, often offer lower CD rates compared to smaller regional banks or online institutions. These smaller banks and online fintech companies attract customers with competitive APYs and lower overhead costs, enabling them to provide better rates.

The Federal Reserve's monetary policy, particularly changes in the fed funds rate, has a direct impact on average CD rates. In January 2025, the Federal Open Market Committee (FOMC) maintained the fed funds rate, indicating stability in CD rates for the near future. The most recent FOMC meeting in June also left the rate unchanged, with the next meeting scheduled for July 29-30. The Fed's rate cuts in 2024, following a period of high inflation, led to a decrease in CD yields from their two-decade highs. These high yields were a result of the Fed's aggressive rate hike campaign in 2022 and 2023, aimed at controlling inflation.

Historically, CD rates have fluctuated significantly. In the early 1980s, rates reached double digits, while by 2019, the APY for a five-year CD was just above 3%. Throughout the early 2020s, top rates generally stayed below 1% APY. Recently, rates have risen, with the best offerings exceeding 5% APY for 1-year CDs. Despite a slight decline, these rates remain much higher than pre-pandemic levels.

Investors looking to maximize their CD returns should consider various types of CDs, each with its own advantages. Brokered CDs, purchased through brokerage accounts, often offer higher APYs. Callable CDs allow the issuing institution to terminate the CD early, while bump-up CDs permit rate adjustments if interest rates rise. No-penalty CDs avoid early withdrawal penalties but may offer lower APYs. Jumbo CDs, requiring a higher minimum deposit, generally provide higher APYs, and variable-rate CDs have an APY that changes with prevailing interest rates. A CD ladder strategy, involving staggered maturities, can provide both short-term access and higher long-term rates.