Is this a good time to seize the high CD Rates that are available today? Maybe we are running into the end of a relatively elevated interest rate cycle on CD rates. This week we saw a slight decrease in average interest rates. If the Fed continues to cut the Fed Funds rate, bank CD holders and investors will see the end of 4% and 5% interest rates.

If the current crisis continues for a prolonged period of time investors will be looking at an episode in which cash equivalent investments will return low interest rates. These low rates are feasibly going to include bond funds, money markets, money funds, CDs, savings accounts, and other fixed interest bearing investments.

Most economists appear to believe that inflation will remain subdued for now. And with the Fed in need of pumping liquidity into the economy, more interest rate cuts by the Federal Reserve are to be expected. Investors that want to be certain they receive the higher CD rates being offeed may want to purchase bank CDs now and even look to the longer term maturities for the added yield.

Clearly an economic rebound is no where in sight. Lack of growth is going to hinder returns on most financial vehicles. The opposing view voiced by some financial experts is the expectation that long-term interest rates will start to move higher due to the potential for global inflation. The prospect that the Fed may have a problem with inflation in the coming quarters or years is worthy of reflection.

Timing market changes and shifts in interest rates is a daunting task, ok it’s near impossible. Cd rate investors have the option of looking to short-term certificates of deposit to maintain flexibility so they can invest at higher returns on long-term CDs in the future. Assuming interest rates are sure to rise. If it appears that the Fed is not done bullying interest rates into submission then CD rates are liable to eventually follow suit in a downward direction. If rates will go down or even stay the same, the more sensible angle is to move toward the longer term CDs.

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