Strong Jobs Report Will Nudge Fed to Increase Interest Rates in Q1 2015

A surprisingly strong September job report is another sign that interest rates will be higher sooner than later. This is welcome news since deposit interest rates have been so low for so long. Forecasts are for bank rates to move higher as early as the Spring or Summer of 2014 when the Federal Reserve increases the federal funds rate.

Some banks and credit unions are not waiting for the Fed and have already started increasing deposit rates. Over the past month, we have seen more than a dozen financial institutions increase CD rates, savings rates and money market account rates. Granted, the increases overall are not that large but at least rates are headed higher.

The government reported that non-farm payrolls increased by 248,000 jobs in September, higher than the 210,000 jobs analysts had expected. The unemployment rate which analysts forecast to remain unchanged at 6.1 percent, actually fell to 5.9 percent. This is the lowest level for the unemployment rate since 2008.

This strong jobs report gives the Fed hawks more ammunition for increasing the fed funds rate in the first quarter of 2015. The Fed's dovish members are pushing for an increase in the second quarter of 2015. Exactly when rates move higher will depend on how strong the economic data is in the coming months.

Either way, rates are moving higher in 2015 so don't lock into a long term certificate of deposit. Regardless, stay invested in short term CDs or variable interest rate accounts like savings accounts and money market accounts.

Listed on the right are average rates this week. Listed below are the highest savings account rates and money market account rates for the first week in October:

Highest Savings Account Rates

• My Savings Direct 1.04% APY 1.05%
• iGObanking.com 1.00% APY 1.00%
• Synchrony Bank 0.95% APY 0.95%
• CIT Bank 0.95% APY 0.95%
• GE Capital Bank 0.95% APY 0.95%
• Ally Bank 0.90% APY 0.90%
• Barclays Bank 0.90% APY 0.90%
• Colorado Federal Savings Bank 0.85% APY 0.85%
• American Express Bank 0.80% APY 0.80%

Highest Money Market Account Rates

• EverBank 1.01% APY
• ableBanking, a division of Northeast Bank 1.02% APY 1.02%
• Sallie Mae 0.90% APY 0.90%
• iGObanking.com 0.90% APY 0.90%
• Ally Bank 0.85% APY 0.85%
• Synchrony Bank 0.85% APY 0.85%
• Mutual of Omaha Bank 0.85% APY 0.85%
• EH National Bank 0.80% APY 0.80%
• First Internet Bank of Indiana 0.80% APY 0.80%
• TIAA Direct 0.80% APY 0.80%