There are two reasons you should consider a short-term CD in this environment:
- The Fed’s next move may actually be to lower interest rates. There’s no chance of a rate hike in 2019 and a 37 percent chance of a rate cut in September and a 49 percent of easing in October, according to CME Group. A rate cut could lower savings APYs.
- Short-term CDs, with a term of two years or less, give you a comparable yield to current longer-term CDs. So, it’s a good way to earn a competitive yield and also give you an opportunity to evaluate rates in a year or two.
In a typical economic environment, a five-year CD should earn more than a one-year CD, says Adam Stockton, director of consumer pricing at Novantas. “If the market expects that rates are going to decrease in the future, that relationship may not hold true,” Stockton says.