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The Federal Reserve lowered the federal funds rate by 25 basis points on Wednesday at the conclusion of its September meeting, marking the central bank’s first rate cut this year. For savers, that’s a turning point.

With this rate cut — and potentially more on the horizon — many are wondering: is now the right time to open a CD before rates fall further? The short answer: If you have funds you don’t need access to for the duration of a CD’s term, it could be worth it.

Here’s everything you need to know about locking in a CD right now.

The benefits of locking in a CD right now

Over the last couple of years, annual percentage yields (APYs) on deposit accounts — including savings accounts and certificates of deposit (CDs) — have remained high because the federal funds rate was high. That’s because the Fed aggressively hiked interest rates to combat post-pandemic inflation, which had the indirect effect of boosting deposit yields.

But with inflation now closer to the central bank’s target and a weakening labor market, the tide for rates has shifted. If you want certainty in an uncertain rate environment, opening a CD now can help preserve today’s favorable yields — which may be dropping soon.

Some benefits of opening a CD now include:

• Rate protection: Unlike high-yield savings accounts, where APYs can drop anytime, CDs guarantee a fixed return for the entire term. Locking in now shields you from future rate cuts. This is especially handy if you’re considering a term of one year or longer.
• Potential to outpace inflation: Top CDs are still paying yields above 4 percent on common terms, currently outpacing inflation. That means your money is actually growing in real terms.
• Safety and stability: CDs are federally insured up to $250,000 per depositor, per institution, per ownership category, making them one of the safest investments available.
• Strategic opportunities: For longer-term planners, a mult-year CD or a CD ladder can provide predictable income and stability in a portfolio.

“My advice for savers is to consider locking in current high rates,” says Hamrick. “If you have money that you’re confident won’t be needed soon, securing today’s higher CD yields is a smart move, as they guarantee returns even as benchmark rates decline.”

To see the best rates on today’s market, check out Bankrate’s list of top CDs.

The downsides of locking in a CD right now

Even if you have the funds, a CD may not be right for you, depending on your financial goals. Here are some downsides of opening a CD now, following the Fed’s recent rate cut:

• Rates may not plunge right away: Some banks may keep CD and savings account APYs elevated to compete for deposits, especially since no one knows with certainty what the Fed’s move will be during its upcoming October. Thus, it’s possible that yields remain strong for a while even after this rate cut.
• Limited access to funds: Unless you choose a no-penalty CD, withdrawing early triggers early withdrawal penalties that can eat into your principal. That makes CDs a poor choice for emergency funds.
• Possibility of higher returns elsewhere: If you’re aiming for long-term growth, riskier assets like stocks or mutual funds may deliver higher returns, though without the same guarantees (and the potential to lose money).
• Inflation uncertainty: Inflation is still an ongoing concern as recent government data shows inflation ticked up in August. If inflation re-accelerates, fixed CD yields could lose some of their purchasing power over time, and it could also bring the Fed to hike rates again, which would bring deposit yields back up.

Bottom line

CD yields have been at rare highs, and the Fed’s rate cut signals they may not stay there much longer. Opening a CD now could help you lock in a strong return and shield yourself from future cuts. But make sure the money you commit is money you can leave untouched — and weigh alternatives if flexibility is a higher priority.