Higher Deposit Rates in 2011?

Will we see higher deposit rates this year? Not likely. Recently economic data and the Federal Reserve will keep deposit rates low for the rest of 2011 and into 2012. Econmic growth this past quarter was revised down to 1%. This is an advance estimate so when the final number is released we could see acutal growth for the quarter even lower than 1%.

Another factor keeping CD rates and savings rates low is the FOMC released a statement saying they plan to keep interest rates, (Fed funds rate and discount rate) at low levels for two more years. When the Fed funds rate and discount rates aren't going higher banks won't be raising deposit rates.

The Fed is also meeting late next month and might release another round of stimulus. The most likely senario of more economic stimulas is the Fed buying long term bond yields to force interest rates lower and to entice economic activity. 

Bank CD rates and savings account rates have been at or near record low levels since the Great Recession. Back in 2007 and 2008 you could find 1 year CD interest rates as high as 5.00%, now you'd be lucky to find 1 year CD rates at 1.50%.

The only thing that will force deposit rates higher is a robust economy which won't happen until 2012 or 2013. When economic expansion increases and inflation becomes a concern the Fed will then act by increasing rates. Once the Fed raises rates financial institutions will raise deposit rates and mortgage rates. Until that time interest rates on deposit accounts and mortgage loans won't be going higher.