Bank CD rates were down fractionally again this week, but there is hope for the future. The FOMC meets this week to decide the direction of interest rates. The consensus is the Fed funds rate will stay in a targeted range of zero percent to one quarter percent.

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Although the FOMC won’t raise interest rates this time around, the Fed will become more hawkish and start pulling liquidity out of the system. The Fed will need to wind down some of its various lending programs and eliminate others, including the buying of 1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt which will end in Q1 2010.

The Fed also proposed term deposits for banks, or certificates of deposit for banks, to drain money out of the system. When the Fed starts pulling liquidity out of the system interest rates will start rising. Mortgage rates will rise quicker and faster than deposit rates.

Bank CD Rates

• 3 month CD rates at banks are at 0.504 percent this week, down from last week’s average rate of 0.509 percent.
• 6 month CD interest rates are at 0.746 percent, down from the prior week’s average rate of 0.753 percent.
• 12 month certificate of deposit rates are averaging 1.015 percent, down from the previous week’s average rate of 1.028 percent.
• 18 month CD rates are averaging 1.193 percent, down from last week’s average rate of 1.20 percent.
• 24 month rates are averaging 1.499 percent this week, down from the previous week’s average of 1.508 percent.
• 36 month CD interest rates are at 1.832 percent, down from the prior week’s average of 1.839 percent.
• 48 month CD rates are averaging 2.064 percent, down from last week’s average rate of 2.070 percent.
• 60 month certificate of deposits are averaging 2.353 percent, down from the prior week’s average rate of 2.357 percent.

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