CD Rate Trends This Week: Nov. 3


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%.

In other words, the CD landscape is beginning to look a lot like Bill Murray in Groundhog Day, where every day is the same – only Andie MacDowell isn’t on hand to pleasantly distract otherwise glum CD holders.

For clues that the situation will change, CD investors should watch the Fed closely. The governing board has spread tens of billions of dollars around Wall Street during the last year, to help prop up banks and ostensibly ease locked-down credit markets. But the bill may be coming due for banks that haven’t repaid the government. Soon, that money will have to be repaid and banks will have to look at other potential revenue streams to keep the cash pipeline flowing. That could result in higher interest rates, as banks set out to attract more customers and more money.

It’s an interesting scenario, but one that may be a long way off.

In the meantime, try out BankingMyWay. You’ll find some of the best CD rates out on the marketplace, and get a leg up on those CD investors who decide to wait it out until the Federal Reserve, like Bill Murray did, breaks out of its “same old, same old” routine.

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

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