Savings and CD Rates Are Perking Up as We Head into Summer

Last Wednesday, the Federal Reserve raised the Fed Funds rate from a quarter basis point to a target rate of 1 to 1.25%.

The move was widely expected, and gives hope to savers who have endured savings rates below zero for the almost a decade.

As I noted in my commentary the last time the Fed raised interest rates in March 2017, the impact on savings and CD rates banks are offering in not necessarily immediate. However, 5 days after the Federal Reserve’s move, we are seeing the leading savings rates and CD rates increase. BestCashCow’s tables show the best online savings rates are now as high as 1.30%. They also show the best online 1-year CD rates are pushing 1.50%, with the best 2-year rates at 1.80% and the best 3-year CD rates over 1.90%.

BestCashCow's local tables may show that savings rates and CD rates are offered in your home area that are higher than those that you find online.

Should you Lock into a Short Term CD now?

At this time last year, 1-year CD rates were as high as 1.35%. As those CDs become due, their holders have outperformed cash, and are in fact outperforming cash right up to maturity.

Inflation is contained. To boot, energy prices are falling due to Trump’s errant energy policy and disastrous climate policy. While the Federal Reserve is only predicting one more rate hike this year and 3 next year, the fall in the 10 year US Treasury rates early this month would seem to indicate that the market is certainly not predicting any dramatic rise in interest rates in the immediate or intermediate future. Therefore, there is little risk in a 1-year CD here, especially if you can find one that has only a 3-month early termination fee if you need the cash back sooner.

As it does briefly and semi-annually (each December and June), Ally Bank has begun offering its 11-month no penalty CD. This time the rate is 1.50% for those depositing $25,000 or more. Unless our tables show a better local savings rate or higher locally offered CD rates in your home market, this offer might be worth taking a look at.