Rates on certificates of deposit (CDs) vary greatly based on prevailing economic conditions, and in 2022 and 2023, CD returns enjoyed a historically rosy period. Driven up by the Federal Reserve’s aggressive fight against decades-high inflation, the top nationwide CD rate climbed above 6%—a level not seen in at least 16 years. But looking back on CD history, we see periods where rates sat just above zero for years on end—while at other times you could earn a remarkable double-digit interest rate on your savings.

A History of CD Interest Rates

CD annual percentage yields (APYs) are linked to inflation and the Federal Reserve's attempts to keep it in check. CD rates are typically higher when inflation is high and lower when it bottoms out.

Here's how it works. Every six to eight weeks, the Fed meets to set the federal funds rate. This benchmark interest rate is the central bank's primary lever for managing inflation, and when the fed funds rate changes, it in turn influences the rates financial institutions are willing to pay consumers for their deposits. When the federal funds rate goes up, banks and credit unions generally raise their savings, money market, and CD rates. And when the Fed lowers its benchmark rate, financial institutions reduce their rates as well.

Because inflation, the federal funds rate, and nationwide CD rates are directly intertwined, we'll see that as history has wound its way through various inflationary periods over the last many decades, so too have CD rates followed a path full of highs and lows.

CD Rates in the 1970s and 80s Reached into Double Digits

Historical CD rate data is available going back to the mid-1960s. That's when data collectors began taking an ongoing monthly reading for 3-month CD yields. (Data about yields for other terms didn't become available until 2009.) Taking a look at rates from these long-ago decades can be surprising, as you'll see that yields climbed far into double-digit territory at various points in the 1970s and 1980s.

In fact, the 1980s is largely viewed as a heyday for CDs, with interest rates hovering near or above 10% for much of the first half of the decade. In December 1980, for example, 3-month CD rates reached an astonishing 18.65%—a rate that's triple what we saw at the 2023 CD rate peak.

High CD rates in the early 1980s are attributed to the exceptionally high inflation the country was experiencing at that time. During 1979, 1980, and 1981, the annual inflation reading was above 10% each year, reaching a peak of 14.8% in March 1980. In response to steadily rising prices, the Federal Reserve aggressively raised interest rates.

You can see the magnitude of the Fed's action in the graph below. During the inflationary 1970s and 1980s, the federal funds rate was pushed to a peak above 10% five times, and almost to 20% in 1981.

The 1990s and Early 2000s See CD Rates Transition to More Moderate Levels

The first half of the 1990s served as a transition period from the high-inflation/high-interest decades into a more stabilized period, which cemented in the second half of the 1990s. With a new rate hike campaign in 2000, the Fed raised the fed funds rate to the upper mid-6% range—and the 3-month CD yield climbed to 6.73% in June 2000.

After dipping between 2001 and 2004 due to the dot-com bust, CD rates saw a resurgent climb to about 5.5% in the summer of 2006 and 2007—just before massive economic trouble was about to hit late in 2007.

The Great Recession Sinks CD Rates to Anemic Levels

The next big event to rock CD interest rates took them the other way. In December 2007, the Great Recession took hold, and by December 2008, the Federal Reserve had cut its federal funds rate essentially to 0%. This tanked CD rates as well, but the biggest damage came as much from the duration of the rate cut as from its magnitude.

The Fed did not begin raising its benchmark rate back up from the 0% floor for a full seven years. During this long bleak period for savers, CD rates sank exceptionally low, providing very little return on their money for the better part of a decade.

The Federal Reserve finally increased rates in December 2015, but with only a single 0.25% bump. And it would not raise rates again until the following December when it added another minimal quarter point. So even though the 0% rate period ended after seven years, at eight years, the fed funds rate had still only inched up to 0.50%.

After this, the Fed raised rates by a total of 1.75% in 2017 and 2018, giving CD rates a slight boost. But with the fed funds rate topping out this time at just 2.50%, the peak 3-month CD rate during this period was 2.69% in December 2018.

The Pandemic Pushes CD Rates Down to the Cellar Again

The recovery in interest rates in 2018 was short-lived, as the arrival of the COVID-19 pandemic in early 2020 prompted the Federal Reserve to again push the federal funds rate all the way down to 0%. With two large decreases in March 2020, the benchmark rate was quickly cut by 1.50%, and it remained at its 0% level until March 2022.

During this two-year valley, the 3-month CD rate wavered in between 0.09% and 0.17%.

Post-Pandemic Rates Catapult to New Record Levels

One of the outcomes of the pandemic was a dramatic spike in inflation, which rose above 9% in June 2022. This was the highest inflation reading in more than 40 years, and as a result, the Federal Reserve jumped into action. Beginning in March 2022, it began raising the federal funds rate at a fast pace, adding 4.25% across seven consecutive increases in 2022.

The Fed didn't stop there, though. It implemented four more rate hikes in 2023, tacking on another 1.00% to the benchmark rate to raise it a total of 5.25%. Its last rate increase to date was in July 2023.

This 17-month run-up by the Fed shot CD rates to a level not seen since at least 2006-2007. The peak rate for the 3-month yield in 2023 was 5.49%, the same as during the peak in 2007.

For other CD terms, we can look at Investopedia's daily rate data for the last few years. Below you can see the best nationally available rate in the major CD terms. Back in December 2021, the top-paying CDs were offering 0.80% to 1.30% APY. Fast forward to the fall of 2023 and the peak rate for each term is four to six times higher.

You can also notice that, as rates continued to increase, the pay-off between short-term and long-term CDs flipped. Before the Fed started raising rates, 6-month CDs paid the lowest rate of the terms, while you were rewarded with the highest rate for a 5-year CD term. This is typical in a period of stable rates.

But once the rate hikes took hold, the returns for short- and long-term CDs inverted, with 6-month CDs offering the highest rate among terms, and 5-year CDs paying the least. The reason is that CDs represent a promise by the bank or credit union on what they will pay you in the future, and after a big run-up, the assumption is that rates will start to come back down. This makes institutions less interested in promising a current high rate for many years down the road.

Where Are Future CD Rates Headed?

Whether CD rates will go up or down in the future is always a guessing game, as Federal Reserve moves are never fully predictable until a few weeks before the committee's next meeting. As we've seen, various economic developments—a financial crisis, a pandemic—can suddenly rear their heads and significantly and unexpectedly alter the Fed's course, and by extension, CD rates. So the best advice is always to shop around to understand what the current best rates are, and then determine if one of those makes sense for your personal financial situation.

Frequently Asked Questions

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.