Why a CD is worth opening after inflation just surged

News on Friday morning showing inflation surging in March may not have been totally unexpected, but it was still an unwelcome development for millions of Americans. For borrowers, in particular, already contending with elevated interest rates on a variety of products, this latest increase all but ensures that rates will remain elevated for the foreseeable future – assuming they don’t even increase later this year. For savers, however, the latest inflation increase may be able to be exploited strategically, especially if they open certain savings accounts in response.

A certificate of deposit (CD) account could be one worth serious consideration now. Interest rates can still be found on these accounts around 4% or higher, and those rates will be fixed, allowing for accurate long-term interest-earning projections. But those aren’t the only timely reasons why a CD is worth opening after inflation just surged again. Below, we’ll break down three others that savers should remember right now.

Start by seeing how much interest you could be earning with a high-rate CD here.

Why a CD is worth opening after inflation just surged

Savers shouldn’t recklessly open a CD account at any point, as it will require them to lock their funds in the account in return for an above-average return. But the timing is right to open one now, especially following the latest inflation developments. Here are three reasons why it can be worth pursuing currently:

Rates here may increase again

How did CD interest rates rise so high in recent years? That was largely due to a combination of the Federal Reserve raising rates in response to an increase in inflation. And while the Fed hasn’t raised rates in years, that response could come back into play should the latest inflation increase prove to be a more permanent one. That, in turn, could raise rates on CDs even further from where they are now. 

However, even an extended pause in the Fed’s rate policy could result in more competitive CD rates, depending on how the bank in question interprets that extension. So, right now, you can secure a rate of 4.15% on a 6-month CD. But if you wait a bit longer or shop around online over the next few days, don’t be surprised to see rates here increase again.

Shop for high-rate CD accounts online today.

You’ll lock your returns in a way that alternative accounts won’t allow

Whether you wait for rates to increase slightly or simply take prompt action now, with a CD, you’ll lock your returns in a way that alternative accounts won’t allow. Money market and high-yield savings accounts, for example, both come with variable rates subject to change based on market conditions. 

So, not only will you not be able to precisely determine how much interest you’ll earn, there’s a good chance that the returns will decline should the interest rate climate cool or even stabilize in the months ahead. But that won’t be a concern with a CD as the rate and interest you stand to earn will hold steady through the account’s maturity date. And that’s an especially important feature right now.

Long-term security and stability are needed right now

Friday’s inflation report wasn’t the only discouraging economic news as of late. Geopolitical tensions and overseas conflicts have caused significant volatility in the stock market. Unemployment just fell, but that followed months of uncertainty in the sector. And the Federal Reserve has signaled that interest rate cuts are off the table for the foreseeable future. 

Against this backdrop, the need for long-term security and stability is especially pronounced. And that’s something a CD can offer – not only against market conditions but also against an endless cycle of withdrawals and deposits that a costly early withdrawal penalty can easily discourage.

The bottom line

With the potential for high rates to rise even further, the ability to lock in your returns in a way that alternative savings accounts won’t permit, and the long-term security and stability a CD offers in today’s volatile economic climate, savers should strongly consider this unique savings account now. Just take the time to calculate your returns and, more importantly, your ability to keep the account frozen through the maturity date. Once you’ve done the math, however, feel free to start shopping around and look to online banks, specifically, which traditionally offer more competitive rates than banks with physical branch locations.