Higher Deposit Rates in the First Half of 2015
2015 will finally bring higher certificate of deposit rates after many years of low rates. A few financial institutions have already increased their CD rates in 2014 but the majority of increases will happen this year. Once the Federal Reserve increases the federal funds rate, banks and credit unions will increase deposit rates.
The Federal Reserve is expected to increase the fed funds rate sometime in the first two quarters of 2015. The current fed funds rate has been in a range of zero to one quarter percent since December of 2008. Higher interest rates are coming but the increases won't be that large.
The first increase in the fed funds rate is expected to be a 25 basis point increase. The last time the fed funds rate was increase was in June 2006 when the rate was increased from 6.00 percent to 6.25 percent. Back in 2015, you could find 1 year bank CD rates above 6.00 percent. We'll be lucky if we see rates that high by 2020.
By the end of 2015, the fed funds rate is likely to be around 1.00 percent. The fed funds rate near 1.00 percent will send 1 year CD rates towards 2.00 percent. The last time 1 year rates were around 2.00 percent was over 6 years ago. Variable interest rate accounts such as savings and money market accounts will also move towards 2.00 percent.
Looking at current interest rates, the best 1 year CD rate on the rate list is at 1.16 percent with an APY of 1.17 percent. The best savings rate is at 1.04 percent with an APY of 1.05 percent. The best money market rates are at 1.01 percent APY.
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