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Current CD Rates and the Future Direction of CD Rates in 2014

When 2013 ended, we ended another year of dismally low CD rates and the hope we had for CD rates in 2014 has been somewhat diminished by the Federal Open Market Committee (FOMC). CD rates and all deposit rates have been at or near record lows for over 5 years now as a result of the financial crisis in 2007 and "Great Recession" in 2008.

In response to the worst economic crisis since the Great Depression, the FOMC lowered the federal funds rate to the lowest rate ever. In December 2008, the FOMC lowered the fed funds rate to a targeted range of zero percent to one quarter percent. As a result, banks lowered CD rates, savings account rates, and money market rates to record lows.

FDIC Weekly National Rates Remain Near All-Time Lows

Every week the Federal Deposit Insurance Corporation (FDIC) releases their Weekly National Rates and Rate Caps. In the most recent rate cap survey of December 30, 2013, average CD rates continue to move lower. Average 1 year bank CD rates this week are at 0.20 percent, down from an average 1 year CD rate of 0.23 percent back in January 2013.

All certificate of deposit terms have been headed lower for the entire 2013 calendar year, marking the fifth year of low interest rates. Listed below are this week's average CD rates, savings rates, interest checking rates, and money market rates along with the FDIC rate cap.

  • Savings Rate 0.06%

  • Interest Checking Rate 0.04%

  • Money Market Rate 0.09%

  • 1 Month CD Rate 0.06%

  • 3 Month CD Rate 0.08%

  • 6 Month CD Rate 0.12%

  • 1 Year CD Rate 0.20%

  • 2 Year CD Rate 0.33%

  • 3 Year CD Rate 0.45%

  • 4 Year CD Rate 0.57%

  • 5 Year CD Rate 0.74%

Current Best CD Rates This Week

The best CD rates available this week on are way above the FDIC's weekly rate survey and higher than average rates. For example, the FDIC's average 5 year CD rate this week is at 0.74 percent and the average 5 year rate reported by MBR is at 1.46 percent. The highest CD rates available in our 5 year rate database is much higher at 3.00 percent from Pentagon Federal Credit Union.

The highest 1 year bank CD rates available right now in our database are from AloStar Bank of Commerce at 1.09 percent with an APY of 1.10 percent. AloStar Bank of Commerce's rate is more than 5 times the FDIC's average rate of 0.20 percent and higher than the average of 0.73 percent reported by MBR.  Listed below are the highest CD rates from 1 month to 5 years listed in our database.

  • 1 Month CD Rate 0.15%

  • 2 Month CD Rate 0.16%

  • 3 Month CD Rate 0.45%

  • 6 Month CD Rate 0.87%

  • 9 Month CD Rate 0.91%

  • 1 Year CD Rate 1.09% APY 1.10%

  • 18 Month CD Rate 1.14% APY 1.15%

  • 2 Year CD Rate 1.40% APY 1.41%

  • 30 Month CD Rate 1.14% APY 1.15%

  • 3 Year CD Rate 2.00% APY 2.02%

  • 4 Year CD Rate 2.20% APY 2.22%

  • 5 Year CD Rate 3.00% APY 3.04%

As you can see from the current rates available, you would have to invest in a 5 year certificate of deposit to get a rate of 3.00 percent. We don't recommend locking into a 5 year rate right now since rates will be moving higher before 2019. The question is when CD rates will actually move higher, which brings us to the future direction of rates.

Direction of CD Rates in 2014 and Beyond

Until this past month, we assumed (like everyone else) that CD rates would move higher by the summer of 2014 when the Fed increased the fed funds rate. We all believed this was going to happen because for over a year now the Fed has stated they planned to keep the fed funds rate near zero percent until the unemployment rate fell below 6.5 percent.

In last month's Fed statement, they changed their tune and said the 6.5 percent rate shouldn't be considered a threshold that would trigger a higher fed funds rate. They also said they plan to keep the rate near zero percent well beyond the point when the unemployment rate falls below 6.5 percent.

So when will deposit rates move higher? Now it doesn't look likely that rates will increase this year but will increase in 2015. Sometime next year is likely because a majority of Committee Members have forecasted a need to increase the rate in 2015. Once the fed funds rate is increased, banks and credit unions quickly follow by increasing deposit rates.
Author: Brian McKay
January 6th, 2014