My inbox is full of two types of emails from readers of BestCashCow and RatesAndInfo.com, a BestCashCow subsidiary.

The first is from those who are excited to have found a great CD rate, and the second is from those who are inquiring whether this is the time to lock into a short-term or long-term CD.

I understand the excitement. Interest rates have been stuck at zero for 24 months due to Fed Chairman Jerome Powell’s mismanagement of Fed policy during the pandemic. While inflation has burned, people have become accustomed to making no more than half a percent in their savings accounts. And, they are now seeing 1-year online CD rates as high as 1.50%, 3-year CD rates above 2%, and 5-year CD rates pushing 2.50%. In some areas, local CD rates are even higher.

Check local 1-year CD rates here.

Check local 3-year CD rates here.

Check local 5-year CD rates here.

I wrote a year ago that folks should not be locking into long-term CDs when interest rates are so close to zero. In an environment where they are still low and projected to go up dramatically in the immediately future, they should be avoiding not just long term CDs, but short term ones as well.

The Fed is about to play some serious catch-up in order to try to get inflation under control. It is going to raise the Fed fund rate by 1%, possibly more, between now and June 15, some six weeks away. Online savings rates by then should be above 1.50%.

The Fed is projected to raise the Fed funds rate by another 1% through quarter point hikes at each of its four remaining meetings in the second half of the year. It could easily raise the benchmark rate by more to get inflation under control (although it also could be influenced, again, to refrain from moves ahead of an election). Even if the Fed is does not follow through, certificate of deposit rates are not offering a premium which prices in the likelihood of these moves.

Inflation - especially against the backdrop of a global war, a continued pandemic and an expanding environmental catastrophe - can be very persistent. It is anybody's guess as to whether and how the Federal Reserve may need to take further action into 2023.

I personally would continue to monitor and compare online savings rates as rates increase through the remainder of 2022. You should also check local rates where you live.

And, then at the end of the year, I would begin to look at CDs, but I’d expect to see all CD products well above where they are today.

Interest rate moves over the last 23 months have been so pronounced that most banks - including online banks - have struggled to offer their customers certificate of deposit rates that compete with what those same customers can get in US Treasury markets.   This has been especially true for those higher earners who live in cities like New York, Boston, Chicago, San Francisco and Los Angeles who benefit from the state and local tax exclusions that apply to interest from US Treasurys or certain federal agencies, like Federal Home Loan Bank (FHLB) and Federal Farm Credit Bank (FFCB).   (Residents of Washington State, Florida, Texas or other states without state income tax, or those with low state income tax rates, cross the threshold where CDs are more attractive more quickly).

US Treasury markets have leveled off and banks have become more competitive. Earlier this year there was a period when one-year CDs were more attractive than one-year Treasuries to even those who benefit greatly from the state and local tax exclusions on Treasurys.  Now, those same people will find that fully taxable CDs offer them a higher after tax yield than Treasurys across virtually all maturities.  

As of this writing, these are the highest nationally available CD rates:

9-month CD @ 5.75%

12-month CD @ 5.67%

18-month CD @ 5.80%

24-month CD @ 5.50%

48-month CD @ 5.20%

60-month CD @ 5.25%

You also may find higher rates locally at branch banks by checking BestCashCow's local CD tables, or a completing site like RatesAndInfo.

Even if you are one of the fortunate or unfortunate people to be paying the top local tax rates in the country (which seldom pierce 10%), you are going to earn more in CDs right now.  

US Treasury and US agency instruments may still make sense for some depositors who may require greater liquidity, but their rates, even after accounting for the tax benefits, may be less competitive with CDs moving forward.

Bottom line: The "I can do better in Treasurys" cocktail chatter has run its course.

Before you even consider any CD (as with any savings account) be sure that you are dealing with an FDIC-insured bank - In order to secure the viability of the US banking system, the Federal Deposit Insurance Corporation (FDIC), an independent agency of the federal government, provides insurance in each qualified bank account for each qualified institution. Each depositor's insurance is provided to a maximum amount of $250,000 in each class of ownership.

While all deposits (CDs, Checking, Savings) held in the same type of ownership are added together and insured to up to the maximum amount, funds held in different classes of ownership (Individual, Joint, Trust, Retirement) may fall under separate FDIC insurance provisions. Please visit the FDIC's website to determine if your financial institution is insured and use its "ask Edie" program to determine your coverage limits.

We recommend that you deposit savings in only FDIC insured institutions and that you do not exceed FDIC coverage limits. Additionally, some major financial institutions claim that deposits over the single account FDIC insurance limits are insured because the financial institution divides your deposits between several separately chartered financial institutions; however, most of these claims have not been tested in the event of a bank failure.

You can check the best online rates here, but also check the best local rates and credit union rates.

You should also compare rates for different deposit terms (eg. 1-year versus 3-year versus 5-year rates). Except during periods rate expectations lead to an inverted yield curve, you will generally earn a higher yield with a longer term CD.

All banks listed on BestCashCow.com are FDIC-insured. All FCUs listed on BestCashCow.com are insured by the NCUA.

CDs, unlike savings accounts, are not completely liquid. Particularly, most certificates of deposit bear substantial penalties for early withdrawal, if it is even allowed. Ordinarily, the penalty for early withdrawal wil be a loss of accrued interest, but certain banks may also assess penalties that will result in a loss of some of your principal, especially if you withdraw you CD immediately after setting it up.