The Federal Open Market Committee, which makes decisions about interest rates, has kept the Fed Funds rate in a targeted range of zero percent to one quarter percent since late 2008.

These record low interest rates have helped the housing market stablize from one of the worst housing bubbles on record. Low rates have also helped the economy recover from the the worst financial crisis since the Depression.

The record low Fed Funds rate has also forced deposit account rates and mortgage rates to record lows as well. Low mortgage rates have been a blessing to anyone financing the purchase of a home or refinancing an existing mortgage.

Low CD rates and savings rates haven’t been much of a blessing for investors, especially retiress. A neighbor of mine recently mentioned that since CD rates are so low right now, he is dipping into his principal and if rates stay low he is going to have to start thinking about coming out of retirement.

I don’t think my neighbor will have to return to work because interest rates have nowhere to go but up and they might start heading up pretty quickly. Fourth quarter GDP is expected to expanded at a robust pace of 4.5 percent and when the unemployment rate starts heading down, the FOMC will feel the pressure to raise the Fed Funds rate to keep inflation in check.

Once the Fed Funds rate goes higher, banks will quickly follow by raising deposit rates on CD accounts and savings accounts. I do expect rates to start heading higher within the first six months of 2010. That being said, do not lock into any long term certificate of deposits. The longest term I would invest in would be six month CDs but I would prefer three month CDs at this time.

The FOMC’s first meeting in 2010 will be in January but they won’t raise rates then. They meet again March 16, 2010 and April 27-28. Depending on the economy and the threat of inflation they will probably raise rates during that time or early summer at the latest.

If you’re thinking about refinancing a mortgage or buying a home in the next six months, you should think about doing it sooner if you can. When the Fed Funds rate heads higher banks will also start raising mortgage rates and probably faster than deposit rates.