Interest Rates on Certificates of Deposit

A certificate of deposit pays a higher rate than a savings account because the saver promises to leave the money alone for a set period. The longer the promise, the higher the rate, which is why the five-year line sits above the one-year and the one-year above the six-month.

All three follow the business cycle, rising in expansions and falling in recessions, and all three fell sharply after 2008 and stayed near zero for a decade. The high rates at the start of the series reflect the high inflation of the early 1980s: a saver lending money for five years then needed a large return simply to stay even. The slider reads all three at a chosen year; the values are sampled from the book's figure.