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Is a $10,000 CD account Still a Smart Move in August? Here’s Why It Might Be.
For individuals looking to grow their savings, opening a $10,000 Certificate of Deposit (CD) account in August could be a strategic decision. While online accounts may offer higher returns than those with physical branches, diligent comparison shopping can yield significant benefits.
A Stable Rate Environment Precedes Potential September Changes
August presents a unique prospect for savers as there are no Federal Reserve meetings scheduled to influence monetary policy and interest rates. This absence of a Fed meeting, while possibly delaying any rate reductions for borrowers until September, provides a window for savers to explore and secure high-yield CD options without the immediate uncertainty of fluctuating interest rates. However, it’s important to note that banks are not obligated to mirror the Fed’s actions directly.As a September rate cut becomes more probable, some institutions might proactively adjust their CD offerings downwards towards the end of August. Therefore, acting promptly is advisable.
Seize the Opportunity for High Rates Before Anticipated Cuts
The likelihood of the Federal Reserve lowering interest rates at its July meeting is minimal, with the CME Group’s FedWatch tool indicating less than a 4% probability. This outlook shifts considerably for September, where the chances of a rate reduction exceed 65%. Considering the Federal Reserve’s larger-than-expected 50-basis-point cut in September 2024 and the broader pressure for rate reductions, August could represent the final opportunity to lock in a favorable CD rate before potential decreases occur. While CD rates are not expected to plummet after September, securing a higher rate now eliminates the risk of accepting a lower one in the fall.
The Verdict: A $10,000 CD Could Be a Wise Choice
For manny savers, the answer to whether opening a $10,000 CD account in August remains worthwhile is a definitive “yes.” With current elevated rates, the extended period to compare options without immediate Federal Reserve action, and the strong possibility of interest rate cuts in September, August presents a favorable time to act. If you decide to proceed, ensure you select a CD term that aligns with your financial needs, as early withdrawal penalties on a $10,000 CD can be considerable.
Matt Richardson is the senior managing editor for the Managing Your Money section for CBSNews.com. He covers personal finance topics including savings, investing, and insurance.
