If the USA suffers a recession, will interest rates that are paid on CD's go up or down? My sister

[patricia92243]

needs to reinvest her CD.

[A HERETIC I AM]

1. The rate won't change unless it is a floating rate CD

As long as she purchases a CD that has an interest rate locked in until maturity, the rate she is receiving will not change during her ownership of it. There are floating rate CD's out there that will fluctuate with the market they are tied to - either the fed rate or some other index (The S&P 500, for instance) but this provision must be clearly spelled out and defined by the issuer for any investor considering them.

Here's a link to an article that discusses these instruments.

http://www.memag.com/memag/article/articleDetail.jsp?id=365761

One of the risks with CD's is called "Reinvestment Risk" wherein you purchase say, a 12 month CD at 4.5% and when the 12 months is up and you need to reinvest, available rates have gone down so you are subjected to lower returns with your money.

Here is an interesting website that defines many investment terms and terminology;

http://www.investorwords.com/5761/reinvestment_risk.html