Money Market Rates Steady as Fed Officials Debate Rate Hike
Money market account rates held steady this week, averaging 0.44. percent. Money market rates and savings rates haven't increased by much yet this year but that will change. We will start seeing banks increase deposit rates when the Federal Reserve increases the federal funds rate.
When the fed funds rate is increased is still open for discussion, not only by economists, but federal reserve officials as well. The latest public statement on increasing the rate comes from San Francisco Fed chief, John Williams.
John Williams recently said "I think that by mid-year it will be the time to have a serious discussion about starting to raise rates." He is concerned the Fed will fall behind the curve on inflation and will have to compensate by increasing rates dramatically.
Quickly increasing rates is never a good thing, and could destabilize the markets. I believe a more slow orderly increase is needed. A token increase of 25 basis points in the coming months won't shock the markets and derail the recovery. The upcoming April Fed meeting is probably to early for an increase, the June meeting should be the time the fed funds rate is increased.
You have to remember, the current fed funds is near zero percent. The rate was lowered to near zero percent over 6 years ago because of the financial crisis. Just to get to a neutral point the rate should be around 1.00 percent. A series of 25 basis point increases will get the rate to 1.00 percent by the end of 2015.
If the rate is increased to 1.00 percent look for average deposit rates to also be around 1.00 percent. The best savings rates and money market rates will be above the average, probably just above 2.00 percent. The last time we saw 2.00 percent rates was about 6 years ago when the fed funds rate was lowered to near zero percent.
Listed below are the highest deposit rates this week:
Savings Account Rates
Money Market Account Rates
RatesORama.com Average Mortgage Rates