The Federal Reserve concluded its 2-day June meeting leaving the Fed Funds rate unchanged. As it tries to remain independent of an unrestrained Executive branch that is compaigning for sharp cuts, it removed the word “patient” from its rate outlook. While the Fed has not committed to a July cut, eight members polled indicated that the next move will be down while one indicated that it may be up.

Online savings rates continue to be attractive and will likely firm in the wake of the Fed’s decision today. One-year CD rates offer a nice premium over the best savings rate and could be a good place to put much of the money that you may want to keep out of other assets and do not expect to need to access over the next 12 months.

We pointed out in our May and April updates, that the Fed may be on hold for a while. We also suggested that May could be a good time to sell and go away. As we enter June, it looks more and more likely that the economy is heading for uncertain times as a result of unnecessary trade wars with China, Mexico and perhaps others initiated by our autocratic president.

I have highlighted No Penalty CDs in the recent past. As we crossed through May, these became more and more attractive by the day. These products offer the advantage of a higher interest rate and the certainty that the rate will be applied for about a year. At the same time, No Penalty CDs give you the flexibility to access your money without penalty after 10 days should you need the money or should rates rise (which is still a distinct possibility if inflation is an outcome of these trade wars). One disadvantage is that you ordinarily cannot make partial withdrawals, although you can always terminate the CD and reinitiate it provided rates do not fall.

As a result of their flexibility in this uncertain period, No Penalty CDs comprise recommendations 1, 2 and 3 for June.

1. Purepoint – 13-Month No Penalty CD, 2.50%, $10,000 Minimum

Although Purepoint’s rate has fallen by 10 basis points since being initiated earlier this year, even at 2.50%, Purepoint’s No Penalty CD rate matches that of the best online savings account.

2. Marcus – 13-Month No Penalty CD, 2.35%, $500 Minimum

Marcus’s product can be easily set up online, has a lower minimum balance requirement than the others and can be terminated in seven days.

3. Ally – 11-Month No Penalty CD, 2.30%, $25,000 Minimum

Ally’s No Penalty rate is not as competitive as Purepoint’s or Marcus’s, it minimum balance requirement is higher and its term is only 11-months (a longer term is actually better as it provides more protection should rates fall). Yet, Ally makes the list because they have been offering this product for years, and it is super easy to terminate the CD and initiate a new one online should rates rise, should you require a partial withdrawal, or should you wish to extend the end date.

Check out other No Penalty and Special Term CD rates here.

The market for savings and money market products – particularly in the online space – continues to be very competitive and rates have not fallen very much as a result of increased economic uncertainty and the fall in long-term rates. They have not fallen yet. Savings rates are not guaranteed and could change from day-to-day. One strategy to protect your interest rate is to look for new entrants in the online space that are spending a fair amount to gain deposits and are therefore unlikely to slash their rates for some time.

Two new entrants in May that have caught our attention are:

1. Susquehanna Community Bank, 2.53%, $100,000 Minimum
2. BMO Harris Bank, 2.45%, $5,000

While the rates are good, some of these new entrants are so untested that there is some risk to this strategy, and you may wish to wait to see the comments on BestCashCow about some of these banks before opening an account.

See and compare all of the best online savings rates here.

Have a great month.

The two most common questions that we get at BestCashCow are “which direction are interest rates going?” and “how do I position myself now if the Fed raises or lowers?”

The answer to the first question drives the second.

Never in the 14 years since this site was founded has it been so difficult to determine the direction of interest rates.

On the one hand, it is unprecedented to have an Administration that knows no legal, ethical, moral or other boundaries and which will stop at nothing to win re-election in 18 months. Trump himself, Kudlow and others will continue to direct unprecedented lobs at the Federal Reserve and Jerome Powell, its Chairman, in order to persuade them to lower rates between now and November 3, 2020.

Powell already changed the Fed’s guidance in November 2018 as a result of Presidential harassment, leading Wall Street analysts to predict that the next Fed move is to lower the Fed Funds rate from its current range of 2.25% to 2.50%.

But, Powell’s original position was that the Fed needs to bring the rate to a neutral position around 2.85% and he has recently used the absence of inflation as his grounds for stalling here. It is highly likely that any prolongation of a tariffs war with China will cause inflation, perhaps even strong inflation if there is also a rise in the price of underlying commodities. Therefore, I think it is impossible to count out the possibility of at least one Fed raise before the end of 2019.

I therefore continue to advise people to keep most of their money in savings and money market accounts and no penalty CDs. However, one-year CDs that offer rates at or above 2.80% and have early withdrawal penalties of only 3-months or less are available online and locally, and I think that they may make sense for some of the money that you know you will not need during that period. I would avoid longer-term CDs for the moment as they are not offering a significant premium over shorter term CDs.

See our latest monthly update for more information on some of the best products currently available.