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Even with a declining inflation rate, a CD offers multiple benefits for savers right now.

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Borrowers looking for a silver lining in today’s inflationary economic climate got it on Thursday morning when the Bureau of Labor Statistics announced a drop in the inflation rate. Down to 3.4% in April from March’s 3.5%, the drop was minimal but is still a move in the right direction. After all, elevated inflation has resulted in the Federal Reserve raising the federal funds rate to its highest point in decades. That’s caused the cost of credit cards, personal loans, mortgages and more to surge.

But it’s also increased returns on savings vehicles like high-yield savings and certificates of deposit (CD) accounts. Savers can earn exponentially more with these accounts than they could have a few years ago, with both offering rates of 4% or higher right now. That said, a declining inflation rate will eventually cause returns on these accounts to fall, so it benefits savers to act quickly, especially when considering CDs. Below, we’ll detail three reasons why you should open a CD now despite the cooling inflation rate.

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Why you should open a CD despite inflation cooling

Here are three reasons why it’s still worth opening a CD despite the cooling inflation news:

The cooling was negligible

Sure, the inflation rate has cooled, but by how much? A 0.1% drop will hardly be enough to improve the economy or change the dynamic of borrowing and saving. Accordingly, interest rates on CDs will remain high for the time being, allowing savers an opportunity to capitalize while they still are. And considering that rates are elevated no matter the CD term you choose, there are plentiful options available. Just be proactive in case the April report is an indicator of additional cooling to come.

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Rates are locked

If you think inflation is on a permanent decline — and it has dropped significantly from a decades-high in June 2022 — then you may want to use the new report as a motivation to get started. Since rates on these accounts are locked, you’ll still earn today’s high returns even if inflation continues to fall — and the federal funds rate eventually gets lowered in response. And every lower inflation report makes that more and more of a possibility. So don’t wait and get stuck with a low CD rate; act now instead.

The alternatives are not as beneficial

CD rates are high right now and they’re locked. But high-yield savings account rates are high and variable, meaning that as inflation cools, rates will drop and the returns on high-yield savings accounts will fall as well. That’s something to be avoided, especially if the April report indicates future cooling ahead. Regular savings accounts, meanwhile, come with a minimal 0.46% rate on average right now. That’s not even keeping pace with inflation, meaning you’re losing money in the process. Compared to these alternatives, then, a CD is the clear top choice, even with inflation cooling now.

The bottom line

A drop in inflation may be the first of many to come. Those considering a CD should act aggressively then, even despite this rate dropping in April. Because it only dropped by a small amount, however, returns on these accounts are still worth pursuing now, especially because they will be locked even if rates eventually fall. And, compared to the variable rate of high-yield savings accounts and the barely existent returns on regular savings accounts, CDs are still valuable for many prospective accountholders now. 

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