CD Yields Hit 4% as Rate-Hike Bets Rise

CNBC reported Wednesday that a handful of online banks are now offering CD yields at or above 4%, even as stubborn inflation complicates the Federal Reserve’s rate path.

Inflation Pressure Keeps Savers in Play

Elevated fuel costs tied to the ongoing Iran conflict have pushed gasoline prices sharply higher over the past year. The national average now sits near $4.46 per gallon, up from roughly $3.17 a year ago, according to AAA data cited by CNBC. April’s consumer price index came in at 3.8% on a yearly basis, the hottest reading since May 2023.

Those persistent price pressures have all but eliminated near-term hopes for Fed rate cuts. Futures markets now put the odds of a rate hike by December at nearly 50%, per CME Group’s FedWatch tool. That backdrop keeps CD yields in an interesting position for savers seeking income on idle cash.

Bread Financial Leads the Charge

Bread Financial bumped its one-year CD annual percentage yield to 4%, a 15-basis-point increase from the prior week. BTIG analyst Vincent Caintic attributed the move to three converging factors: accelerating loan growth, a strategic call on the direction of rates, and the bank’s retail deposits being a cheaper funding source than alternatives. Loan growth matters here because interest earned from lending helps institutions absorb the cost of paying higher rates on deposit products.

Bread Financial is not alone in offering these returns.

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Where Else Savers Can Find 4%

Popular Direct is currently offering 4.11% on a 12-month CD as of Wednesday. Savers willing to consider slightly different maturities have more options still. Sallie Mae carries a 13-month CD at 4%, while LendingClub offers 4.15% on an 11-month product.

There are caveats worth noting. CD yields are unlikely to outpace inflation over any meaningful period. Banks also retain the right to revise rates when a CD matures, meaning renewal terms may be less favorable than initial ones.

Outlook for Deposit Rates

Caintic told CNBC he does not broadly expect online banks to trim deposit rates further in the near term. Any cuts that do materialize, he suggested, would signal slower-than-anticipated loan growth rather than a shift in Fed policy expectations.

The analyst’s comments imply that today’s competitive CD rates could persist for at least the coming months, giving savers a window to lock in returns while rate uncertainty remains elevated.

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