October 2019 Update - Hard to Get Excited About CDs and Even Harder to Get Excited About Savings

This time last year, everyone was getting very excited about savings rates moving well above 2%, about 1-year CDs at 2.85% and above, and 5-year CDs at 3.50%. Those with cash were finally finding risk-free opportunities for their savings that matched the dividend yields that they could get from stock holdings in major industrial companies.

My, how times have switched back again quickly!

In short order, savings rates have been falling as the Fed has now cut rates twice this year. While the Federal Funds rate is now at a target 1.75% to 2.00%, some savings rates are still as high as 2.40%. But, estimates are for as many as two more rate cuts this year as the economy continues to slow and impeachment becomes heated. 2-year US Treasuries are now yielding below 1.40%. If are still excited about savings rates, don’t get too excited because if the Federal Reserve does anything like what economists and market observers are predicting, they could go much lower in the months ahead.

In this environment, if there is anything to get excited about it is still CD rates. BestCashCow is still showing several online banks offering 1-year CDs at 2.50%, with 2-year and 3-year CDs as high as 2.60%, and 5-year CDs as high as 3.00%. You may even find higher rates at banks and credit unions.

We’d be careful not to put too much in long-term CDs. However, as 2020 is going to present a rather uncertain political and economic environment, locking in an interest rate for the next year on money that you know you won’t need makes sense.