CD Rate Trends This Week: Jan. 12

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At least someone had a good year in the banking rate market.

Drinks are on the Federal Reserve, which earned $45 billion in record profits in 2009, according to The Washington Post. The U.S. central bank has been operating since 1915, and not in any of its previous 94 years did the Fed earn that kind of cash.

But the taxpayers don’t get any of the money — the federal government does. The Federal Reserve’s charter calls for the bank to ship any annual profits off to the U.S. Treasury.

Ironically, a big chunk of the Fed’s $45 billion profits comes from its mortgage-security buyback program. Why “ironically,” you ask? Because the buyback program forced interest rates downward, to help prop up the U.S. banking system and the domestic mortgage market. In turn, certificate of deposit investors saw rates go down as the Fed’s $1.25 trillion buyback program succeeded in keeping interest rates down.

Maybe that’s why CD investors won’t be waving any pom-poms over the Fed’s 2009 windfall.

This week, those same investors won’t be waving any pom-poms over CD rates, either. While CD rates did pick up ever-so-slightly on the high end of the scale, most CD rate categories were down for the week, blunting short-term hopes for a better bank rate environment to kick off 2010.

For the week, three-month CD rates fell to 0.39% from 0.4%, while six-month CD rates slid to 0.59% from 0.6%. One-year CDs dropped to 0.88% from 0.9%, and two-year models fell to 1.35% from 1.36%.

The exceptions to the rule? Four-year CDs rose to 1.89% from 1.88%, and five-year issues held steady at 2.19%.

All rates come from the BankingMyWay Weekly CD Rate Tracker.

Is there any hope for CD rate investors going forward? Slowly, but surely, economists expect interest rates to rise during the second half of 2010. In a Bloomberg survey of U.S. economists, the experts say that the Federal Reserve will finally hike interest rates during the third quarter of 2010. The survey consensus calls for a 0.25% rate hike in 2010 and a 1.25% rise in interest rates by 2011.

But that’s a long way off for CD investors who’d love to catch a break now — and not six-to-eight months from now.

Here’s a silver lining. While you wait for the Fed to act, check out the best rates on the BankingMyWay CD Rate Search Tracker. Some good deals are out there, and with the help of BankingMyWay, you’ll find them.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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