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CD Rates, The FOMC and The Economy
 

CD Rates, The FOMC and The Economy

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The Federal Open Market Committee (FOMC) had their June meeting and released a statement saying they plan to their current highly accommodating policy in place. Which means more of the same, low CD rates, savings rates and mortgage rates.

The FOMC also announced they plan to keep the Federal Funds rate in a targeted range of zero percent to one quarter percent to foster economic growth. The FOMC also said they continue to anticipate current economic conditions will warrant these exceptional low rates until the end of 2014.

Unfortunately for those out there who are net savers will continue to lose out. One of the hardest hit demographic are retirees who rely on interest income as their sole source of income.

Right now the best CD rates on 1 year certificates of deposit are just above 1.00 percent. Longer term CD rates are even more pathetic. The highest CD rates on 5 year certificates of deposit are just below 2.00 percent. The best savings account rates are also just above 1.00 percent and dropping weekly.

While savers lose out those who borrow more than they save are the real winners. With current mortgage rates today on 30 year conforming loans under 4.00 percent you can save tens of thousands or hundreds of thousands of dollars in interest over the life of a loan.

15 year mortgage rates today are under 3.00 percent, if you can afford the higher payments with a 15 year loan that's where the real savings are.

Ever since the economic crisis of late 2008 interest rates have been falling to record lows. From the FOMC statement we can expect that all types of interest rates, except credit card rates, will stay this way past 2014.

You can see the Fed Chairman, Ben Bernanke, talk about current policy in this video:


Author: Stacy Everest
June 25th, 2012