Bank certificate of deposit rates made another move higher just days before the Fed makes their last announcement of the year on the direction of interest rates.  The overwhelming majority of market participants are expecting the Fed to jack up short term interest rates at the end of their two day meeting on December 16, 2016.

Dec. 16 is the date when the Fed concludes a two day meeting of the Federal Open Market Committee (FOMC).  It’s the FOMC that sets the fed fund target rate, which has kept the target at rate at next to zero since 2008.

CD rates have been inching higher very slowly for several weeks preceding to this week’s Fed meeting.  Rates have now jumped again just days, if not hours, before the Fed makes their announcement with more than a few top performing banks, banks that offer high yields CDs on a consistent basis, upping their certificate yields.

As of December 14, the CD rate index has climbed to 1.243%, a rise of 8/1000ths of a percent from the previous week.  The current average rate in the index is up just over one basis point, 0.011%, from the end of November and 7.2 basis points since the start of the year.  One basis point is equal to 1/100th of a percent.

Rate increases in the past five days were seen on a number of bank CD accounts that regularly make the list of the top ten best CD rates available nationally.  Jumps in CD rates, big and small, showed up on EverBank CDs, Alostar Bank CDs, CalFirst Bank CDs, CIT Bank CDs, and the CDs offered by BAC Florida Bank.

The rate spikes were fairly wide spread, covering six month term CDs, one year CDs, two year CDs, and five year CDs.  The only term in the CD rate index not affected by changes taking place before the Fed meeting this week were the short term, three month bank certificates.

The upward movement in bank rates prior to a Fed interest rate move is not uncommon.  Market forces often lead the Fed to some extent, quite possibly as a result of the press announcements or interviews with Fed members that telegraph the impending rate changes.

Once the Fed rate hike is officially announced, savings rates as well as borrowing rates are sure to move even higher.  The impact from this particular Fed action could have more long term follow through in the interest rate market since the Fed has kept its benchmark interest rate, the fed funds rate, at a range between zero and one-quarter percent for almost ten years.

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