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Higher Savings Account Rates Coming?

Higher Savings Account Rates Coming?

Are higher savings account rates coming? That is the million dollar question, or $250,000 question. The past three years depositors have suffered with the lowest savings account rates and CD rates in our lifetime, hopefully these current rates will be the lowest in our lifetime. There isn't much more downside risk to lower rates so we have no where to go but up. The question is when?

Swing back to mid 2009 when the Great Recession ended everyone believed the economy recovery would be strong and by now the Federal Reserve would raise interest rates. Well neither has happened.

The economy has been limping along, in fact the advance estimate on 2nd GDP was lowered to only 1% making the growth rate on 0.7% for the first half of 2011.

The Fed released a statement last week saying they plan to keep the Federal Funds rate at a low of zero percent to one quarter percent until mid 2013. Coming out and staying they were keep interest rates low for that low into the future was a first for the Fed.

If the economy starts expanding faster we could see the Fed act sooner to raise interest rates. The bond markets will force the Fed's hand if the markets anticipate a strong recovery and inflation.

Until this happens you can expect savings account rates and CD rates to stay at these levels and possibly drift down even lower. Many banks have recently lowered their bank savings rates and bank CD rates. You can expect more to follow with lower rates in the coming months but once we turn the corner on the economy deposit rates will go higher.

Author: Monica Harris
August 28th, 2011