I only started looking at I bonds recently, after reading another poster on these forums was using them for their EF*. Since most cash instruments, and even many bond investments, under perform inflation over time I-bonds make for a great Emergency Fund since they are guaranteed to at least keep up with inflation. I decided to buy some, did a lot of research on 'when' to buy them, and there is a high likelihood "now" is the answer.
Background: I-bonds function like a CD that adjusts for inflation. They are guaranteed by the government, the principle doesn't fluctuate(like other bonds), and they pay you interest that is guaranteed to keep up with inflation. When you buy an I bond you can't get the money back for a year, there is a small penalty if you take it back out within 5 years, but you can hold onto them for 30 years if you like. Oh, and you can defer taxes until you close the I-bond if you like.
Calculation: A fixed rate + inflation adjustments. The inflation part of the rate is variable and changes every 6 months based on inflation. If we have deflation you might not get any interest at all. The fixed rate is fixed for 30 years.
Right now that calculation is 0.5% fixed + 2.32% for inflation = 2.83%.
Interest rates: If rates drop again your I-bond will still at least pay 0.5% + inflation which is likely to be higher than CDs and saving accounts in a low rate environment(remember 0.01%). On the other hand, if we see higher rates in the future, you could just switch out your I bonds for new I-bonds with higher fixed rates.
Why now? The fixed rate is why. Since 2009 the rate has been steadily around 0% + inflation. They hit 0.5% + inflation in November, and while the inflation adjustment changes every 6 months, the fixed rate is fixed for 30 years. I-bonds bought on or after May 1st will receive a new fixed rate. Rates on treasury bonds and inflation protected bonds have been falling since November so it is highly likely that the new fixed rate will be lower than 0.5%. If you want an EF that is as safe as a CD and guaranteed to outpace inflation over time it's a good time to research I-bonds.
https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm*They can't replace your entire EF instantly. You can only buy 10k at a time, and you have to hold them for at least one year.