Current Variable Deposit Rates Remain Stable as FOMC Gives Clues on Rate Increase

Variable interest rates remain stable this past week as the Federal Open Market Committee (FOMC) held their March meeting. We are waiting to see when the FOMC will increases the federal funds rate because it will have a direct effect on deposit rates.

The Fed didn't increase their key benchmark interest rate, the federal funds rate, but they did give glues on when a hike might happen. The biggest clue was in their language on the fed funds rate. They dropped the word "patient" which was used to give guidance on the when a hike was expected.

A rate hike during the next scheduled meeting in April is highly unlikely. A more likely scenario is a hike during the June meeting or September meeting. I still believe a 0.25 percent rate hike will take place in June. The Fed has been criticized for keeping the rate near zero percent for too long. A token increase of 0.25 percent won't shock the markets and at the same time quiet the critics.

Banks and credit unions are anticipating higher rates and have increased fixed CD rates. The best CD rates moved slightly higher the past several months, but savings rates and money market rates haven't. For example, the highest savings rates available on the rate table have remained at 1.05% APY. During the same time, the highest CD rates available on the rate tables have moved from 1.05% APY to 1.31% APY.

Financial institutions are offering higher timed deposit rates to entice you to lock in deposits at current low rates. By the end of 2015, 1 year CD rates should be near 2.00 percent to 2.50 percent. It's more profitable for financial institutions to lock in deposits at 1.30% than 2.50%.

Higher rates are on the way, therefore it makes sense to either keep deposits in variable rate accounts or short term CD accounts. The rate difference between both types of accounts is small. Below you can compare the best rates available this week.

Best Savings Rates

  • GE Capital Direct Rate 1.04% APY 1.05%

  • My Savings Direct Rate 1.04% APY 1.05%

  • Synchrony Bank Rate 1.00% APY 1.00%

  • CIT Bank Rate 1.00% APY 1.00%

  • Barclays Bank Rate 1.00% APY 1.00%

  • iGOBanking Rate 1.00% APY 1.00%

Best Money Market Rates

  • EverBank 1.01% APY (first year, 0.61% after)

  • Synchrony Bank Rate 0.85% APY 0.85%

  • Ally Bank Rate 0.85% APY 0.85%

  • Mutual of Omaha Bank 0.85% APY 0.85%

Best 1 Year CD Rates

  • Chartway Federal Credit Union Rate 1.30% APY 1.31% (membership required)

  • Connexus Credit Union Rate 1.30% APY 1.30% (membership required)

  • Bank Direct Rate 1.20% APY 1.21%

  • Synchrony Bank Rate 1.19% APY 1.20%

  • CIT Bank Rate 1.19% APY 1.20%

Author: Brian McKay
March 23rd, 2015