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The inflation rate just fell. Here's why you should open a CD now.

As the inflation rate continues to fall, rates on CD accounts may drop, too.  Getty Images

Inflation continued to fall in May, the Bureau of Labor Statistics announced on Thursday. The rate dropped to 3.3% in the month, down from both April's 3.4% and March's 3.5%. And while inflation remains more than a full percentage point above the Federal Reserve's target 2% goal, recent months have seen some encouraging, if slower than preferred, improvement.

Against this backdrop, borrowers will need to limit how much credit they use as interest rates will remain high until inflation falls more dramatically. Savers, however, should be proactive by taking advantage of high-interest-earning vehicles like high-yield savings and certificates of deposit (CD) accounts. CDs, in particular, offer timely benefits right now. To earn those benefits, however, savers should act quickly. Below, we'll break down three reasons why you should open a CD now that the inflation rate just fell again.

See how much more you could be earning with a top CD account here now.

Why you should open a CD now

With inflation falling in recent months the window of opportunity to open a high-rate CD may soon close. Here are three major reasons why you should open an account now:

Interest rates are high

You can open a CD account with a rate of 5.65% or higher right now. That's a significant amount to be earned at any time, but especially when stacked up against the CD rates from recent years. In 2020 or 2021, for example, rates on these same accounts hovered just around 1%. So it makes sense to take advantage of these rates while they're still widely available. 

If you do, you could potentially earn hundreds or even thousands of dollars in interest right now. But you'll need to be proactive, start shopping for lenders and be comfortable opening an account with an online bank (which usually offers the highest rates). 

Get started with a CD today.

Rates could fall in the upcoming months

Today's high-rate climate won't stay this way forever. If inflation continues to fall, the expectation is that the federal funds rate, which lenders use to determine what they offer borrowers and savers, will fall too. When that happens — and it could happen once or twice before the end of the year — rates on products like CDs will inevitably drop, too. While that drop will be marginal to start, it could fall further as the economy improves. 

So it behooves savers looking to lock in the highest rate possible to act right now. With rates already high, no matter the CD term that's chosen, it doesn't make sense to wait for a rate adjustment downward.

You'll earn high returns even when rates fall

While CDs and high-yield savings accounts both offer high returns right now, the former comes with a locked rate while the latter has a variable one that will adjust over time. So, if you open a CD now, particularly one with a term longer than 12 months, you'll enjoy elevated returns for years to come, regardless of what happens in the larger rate climate. While this can be a poor approach in an environment in which rates are rising, it can be a smart one now as inflation continues to cool and interest rate cuts look more realistic. 

See how much you could earn with a top long-term CD here now.

The bottom line

When it comes to financial products and services, your timing needs to be just right. Fortunately, right now looks to be a great time to open a CD. But with a dwindling inflation rate to contend with, the benefits of opening a CD may not be as significant later in 2024 and into 2025 as they are right now. With rates high, the potential for rates to drop significantly and the ability to lock in a high rate even in the face of a cooling rate climate, savers should consider opening a CD now. Just be sure to do so with the right deposit amount as any attempt to withdraw your funds before the CD has matured will result in an early withdrawal penalty

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