Interest Rates to Remain Low Until 2016 if the Fed’s Yellen Has Her Way
For the past several years the Federal Reserve has said they plan to keep the Fed funds rate near zero percent until the end of 2014. In the second to last Fed meeting, they announced plans to keep the rate at zero percent until mid-2015. Now the Fed's Vice Chair Janet Yellen said that U.S. short-term interest rates may need to stay near zero until early 2016, a full year longer than the original plan.
Yellen is advocating keeping the Fed funds rate at zero percent until 2016 to reduce the unemployment rate more quickly. Yellen spoke to students at the Haas School of Business at the University of California, Berkeley. You can read Yellen's entire speech here: Revolution and Evolution in Central Bank Communications.
This will mean we might have another three years or more of low CD rates, savings rates and all other deposit rates. The thought of having to live with dismal deposit rates for another three plus years is almost unbearable. The Fed has acknowledged their current policy is hurting holders of interest bearing investments like certificates of deposit, but their policy also inflates the value of other assets like homes and businesses.
Retirees who rely on interest income have been hit hard by low CD rates and many other people have put off retirement. The best CD rates right now on the longest term certificates of deposit are under 2.00 percent. Long term rates are so low you're better off investing in shorter term certificates of deposit. Unfortunately the highest CD rates on short term CD accounts like 1 year CD accounts are just above 1.00 percent.
As the old saying goes you can't fight the Fed so you either have to live with very low returns on interest bearing investments or make riskier investments. If you are sticking with the safer lower return investments of certificates of deposit, our rate tables will help you find the highest CD bank rates available.
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