The Federal Reserve has been criticized for its role in driving down interest rates for savers, but the federal funds rate mostly impacts short-term CD rates, Leggett says.
Because the maturities on many CDs stretch years into the future, banks don't just base their rates on the short-term actions of the Fed, he says. Instead, banks try to minimize future funding costs by locking in as much money into the longest-term, lowest-yielding CDs they can offer.
Giant regional banks, known as federal home loan banks, lend to individual banks and also play a role. Individual banks try to maintain a certain spread between the rate they're paying on long-term CDs and what federal home loan banks are charging for long-term loans.
How it's crushing yields: Right now the federal funds rate stands between zero percent and 0.25 percent, and that's helping to keep short-term CD rates in the basement.
Rates for longer-term loans from federal home loan banks also have been extraordinarily low, Mosby says.
What needs to change: Leggett says for short-term CD rates to climb, the Fed will need to raise the federal funds rate.
For longer-term CDs, federal home loan banks probably will have to raise the rates they charge commercial banks for long-term loans before we see significant CD rate increases. Longer-term CDs rates also will depend on banks raising their projections for where rates will go in the future.