Should you open a CD before the May Fed meeting? Experts weigh in

Savers looking for signs about where certificate of deposit (CD) interest rates are going likely have an eye on May's scheduled Federal Reserve meeting, where the Fed could provide hints about its benchmark rate strategy for the rest of the year. Fed rate decisions tend to impact CD rates; rate cuts usually lead to lower CD rates and vice versa. 

May's meeting is a critical one, as the Fed didn't meet this month, which meant we didn't get too much insight into how the stock market's early-April volatility and positive March inflation report could influence the Fed's rate strategy. However, Fed Chair Jerome Powell hinted at a continued rate pause via remarks made earlier this month, saying changing economic policies have caused a "challenging scenario" of managing inflation and a slowing economic climate.

What does all this mean for savers who are considering opening a CD before the May Fed meeting? We talked with some experts to find out. 

See how much interest you could earn with one of today's top CDs here.

Should you open a CD before the May Fed meeting?

So far this year, the Fed has enacted a rate pause, leaving rates where they are since cutting them in December. For savers, the pause is a benefit because it keeps CD rates relatively high. But will the rate pause continue at the Fed's May meeting? Jasmine Ball, founder of financial planning firm Bamboo Financial, thinks that may be the case. 

"While I don't expect the Fed to raise rates at the May meeting, I also don't anticipate any firm guidance on cuts just yet," Ball says. "Given the recent market volatility and persistent inflationary concerns, the Fed will likely maintain a 'wait and see' approach. They'll want to see more sustained data before taking action."

Consequently, savers may see CD rates decline after the meeting if the Fed confirms it plans to cut rates later this year, Ball says. 

"Deposit account rates, including CDs, have generally been holding steady—especially at smaller banks and credit unions that are still competing for deposits," she says. "Even if the Fed holds rates steady in May, I wouldn't be surprised to see some CD rates start to trend lower in the coming months, particularly if rate cut expectations resurface."

CD rates holding steady or falling are within the range of possibilities for Brian Seymour II, a certified financial planner (CFP) and CEO of investment adviser firm Prosperitage Wealth.

"Assuming the Fed stays the course, we'll likely see CD and savings rates plateau or begin to drift lower," Seymour says. "Banks tend to price in future expectations, not just current policy, and any perceived shift toward rate cuts in the back half of the year could prompt them to trim yields. That said, short-term deposit rates should remain relatively strong in the near term."

With expectations that the Fed will likely continue its rate pause with the possibility of rate cuts coming later in the year, savers should consider opening a CD before the May Fed meeting, Ball says. 

"If someone is shopping for a CD right now and has found a rate they're happy with, I'd say go ahead and lock it in," she says. "There's always a chance we've seen the peak on longer-term CD rates, especially as talk of rate cuts later this year lingers. Waiting for a better rate could backfire, especially for savers who want predictable returns or are nearing retirement."

While Ball sees CD rates dropping after the May Fed meeting, there's a chance they could also stay relatively close to where they're at today, says Marcus Sturdivant Jr., managing member of financial planning firm The ABC Squared. 

"If you are opening a CD to catch rates before a cut, you can probably get those rates after the May meeting," he says. "Savers do not need to rush and get a CD; you have time to lock in rates similar to the ones now."

If you decide to open a CD before the May Fed meeting, long-term CDs (terms of one year or more) offer rate stability but tend to have a lower annual percentage yield (APY) than short-term CDs. If you're hesitant to lock up your money in a long-term CD, short-term CDs are a great option because of their rates, Seymour says. 

"You don't have to go all-in on long-term CDs, but opening a short to intermediate CD before the meeting can help you take advantage of today's rates before the tide shifts," he says. 

Compare top rates and pick an account here before the May Fed meeting.

How much can you earn with a CD now?

In today's rate environment, short-term and long-term CDs regularly offer rates above 4%. If you want to open a long-term CD right now to avoid possible rate cuts later this year, here's what your returns could look like on a $5,000 deposit in three different terms at today's rates, per Bankrate: 

• 1-year CD at 4.25%: $212.50 at maturity, for a total of $5,212.50
• 18-month CD at 4.16%: $315.22 at maturity, for a total of $5,315.22
• 2-year CD at 4.15%: $423.61 at maturity, for a total of $5,423.61

If you choose to deposit $10,000 in a long-term CD, here's what your returns would look like at today's rates: 

• 1-year CD at 4.25%: $425.00 at maturity, for a total of $10,425.00
• 18-month CD at 4.16%: $630.45 at maturity, for a total of $10,630.45
• 2-year CD at 4.15%: $847.22 at maturity, for a total of $10,847.22

As you prepare to open a CD, make sure you shop around to find the top rates. Additionally, remember that CDs are meant to keep your money until maturity, so, unless you open a no-penalty CD, you'll likely pay a penalty if you withdraw your deposit before your account matures. 

The bottom line

There are good arguments for both opening a CD now and waiting until after the Fed meeting in May. Risk-averse savers may feel most comfortable locking in a long-term CD's high APY right now to avoid any rate drops later this year. Savers who tend to be more flexible with their approach can open a short-term CD right now and cash in on excellent rates, then adjust their savings strategy at maturity based on the rate environment at that time.