The Federal Reserve’s Open Market Committee, the group that decides economic interest rate policy, meets today to discuss the economy, inflation, unemployment, toxic balance sheets and maybe even the ability of leprechauns to locate gold.
Hey, why not? If there was ever a need for a “kitchen sink” mentality from the Fed, this is it.
That’s because policy makers have a lot to mull over these days. While the media cheer the 3.5% Gross Domestic Product number released last week, sober minds wonder if the economic bump-up is the genuine article or not. If the Fed thinks so, it should eventually raise interest rates to ward off inflation – that would raise CD rates in the process. But if Fed officials view the “recovery” as a mirage, they’ll likely stand pat for another quarter; anxious not to raise rates into a still-sluggish economy.
That’s the landscape certificate of deposit investors face this week. Realistically, the Fed won’t do anything of note this week – not when there is so much uncertainty in the air. If so, CD rates will be left to other economic whims, like the U.S. dollar and aggressive bank marketers, if any upward movement is to occur.If last week is any indicator, that won’t happen this week, either. CD rates stood pat pretty much across the board last week, as banks held tight to that “wait-and-see” mindset we’ve seen so much of this autumn. For the week, one-year CDs, as measured by the BankingMyWay National CD Rate Tracker, hovered around 1.03%. Two-year issues inched down to 1.48% from 1.49%, while four-year CDs stood firm at 2%. It was the same deal for five-year CDs, which clung fast to the 2.29% level.
Further down the ladder, the same picture was painted. Three-month CDs fell to 0.44% from 0.45%, while six-month CDs inched back to 0.68% from 0.69%.