Senate Cents: A Financial Wellness Blog

Inflation is stabilizing:

The consumer price index increase has held steady at 3.7% for both August and September, a notable improvement from the peak of 9.1% in June 2022. While this signals a positive trend in slowing down the pace of price increases, economists predict it might take until 2026 for the annual inflation rate to return to the Fed's target of 2%. This provides a window of opportunity to capitalize on high CD rates before inflation rates decline and the Fed adjusts interest rates downward.

Opting for short-term CDs:

While long-term CDs typically offer higher rates, the flexibility of shorter terms is attractive for those with diverse investment strategies. With short-term CDs, investors have the freedom to decide whether to renew the certificate or allocate funds elsewhere when the term concludes. This flexibility, coupled with some institutions offering rates above 5% for short-term CDs, makes them an appealing choice.

Low-risk investment in uncertain times:

Guarantees are rare in the financial world, but a CD offers precisely that—a secure investment. Regardless of economic or stock market fluctuations, CDs operate like a "set it and forget it" savings plan, providing a predetermined amount of interest on the investment. In a transitioning economy, CDs allow individuals to maximize returns on savings without the uncertainties associated with other investment options. Opening a CD ensures clarity on when the funds will be received and the exact amount of earnings.