The upshot, though, is the same: Americans are more likely to consider CDs if they pay more in interest, especially compared to inflation. CD yields jumped in 2022 after the Fed raised rates by 4.25 percentage points in nine months. That’s what has made the current moment so interesting. The aftermath of the Great Recession, in which the Fed kept interest rates near zero for almost a decade as inflation continually ran under its desired level, is just the most recent trend. The story behind drooping CD rates is complicated, and it involves: falling inflation (until recently), an aging population, technological innovations and the Federal Reserve lowering interest rates. At the beginning of 1989, for instance, a one-year CD offered an 8.30% APY. The reason? CDs used to be a much better deal. In 2019, however, only 7.7% of households had a CD.
They were still in vogue nearly two decades later, as more than 16% used them in 2007. Roughly a fifth of households owned a CD in 1989, according to the Fed. CDs used to play an important, albeit complimentary, role in the finances of everyday Americans.