Inflation just fell again. Here’s why you should open a long-term CD now.

Inflation just fell for the third consecutive month. While cooling price growth may be welcomed at gas pumps and grocery stores, it can be concerning for savers who want to earn the highest returns possible. After all, lower inflation could produce lower interest rates, which may shrink returns on deposit accounts. 

But you don’t have to accept those lower returns if you open a long-term certificate of deposit (CD). These unique savings vehicles make it possible to lock your rate of return in for multiple years. But, there’s a caveat. You must agree to keep your money in the account until it matures or pay a penalty to access it early. Stlll, the higher rate for a longer time period could be worth it now.

See what long-term CD rate you could lock in here now. 

Why you should open a long-term CD now

As inflation falls, long-term CDs are becoming more attractive. Here are three reasons you should open one today:

Long-term CD rates are still high

One of the biggest reasons to invest in a long-term CD right now is that the return rates on these accounts are high. Many leading long-term CDs come with APYs over 4%. Some 5-year CDs are paying APYs as high as 4.80%. 

But, you’ll need to act quickly to take advantage of such high rates. With the inflation rate cooling, it may only be a matter of time before today’s elevated CD rates become a thing of the past. 

Earn more on your money with a long-term CD today. 

Rates could fall quickly

Another reason to open a long-term CD right now is because rates could fall quickly. “As inflation continues to fall towards the long-term Fed target of 2%, we expect interest rates to follow and decline broadly,” explains Noah Damsky, CFA, principal at the financial planning firm, Marina Wealth Advisors. 

While the likelihood of the Fed cutting its benchmark federal funds rate increases each time inflation cools, a formal rate cut doesn’t need to take place for lenders to start offering lower rates on their savings accounts. Financial institutions often make preemptive rate decisions based on what they think the Federal Reserve might do. So rates on CDs could drop more quickly than anticipated.

You’ll be protected even when rates are cut

If you open a long-term CD now, you’ll be protected from potential rate cuts. “A long-term CD is one way to effectively secure current interest rates before they potentially fall with inflation,” says Damsky.

CDs are fixed-rate savings vehicles that pay you the return you agree to when you open the account for its entire term. So, if you lock in a 5-year CD with a 4.80% APY now, you’ll enjoy that high return rate until the account matures in five years – even if financial institutions cut their CD rates in the future. 

Don’t wait for rates to fall to lock in your long-term CD returns. 

The bottom line

As inflation cools, interest rates could fall, making it important to adjust your financial strategy. Opening a long-term CD is one way to protect your savings returns in today’s economic environment. These deposit accounts currently offer high APYs, but today’s rates may not last much longer, so it makes sense to lock in a high rate now. Compare today’s highest-paying long-term CDs to protect your savings today.