bank rates

CD Rates Fall Again This Week

Bankaholic.comHow low can CD rates go?

The latest look at where rates are headed indicates we probably haven’t seen the bottom of this record-setting plunge.

Bankrate’s weekly survey of large banks and thrifts taken June 10 found the average annual yield for a:

Three-month CD slid to 0.62% from 0.64% the previous week. That’s the lowest average since Bankrate began tracking 3-month CD rates in March 1989.

Six-month CD fell to 0.91% from 0.92% — a five-year low.

One-year CD dipped to 1.18% from 1.20% — the lowest it’s been since May 2004.

Two-year CD dipped to 1.46% from 1.47% — the lowest it’s been since August 2003.

Five-year CD held at 2.20% for the third straight week. That’s the lowest average since Bankrate began tracking 5-year CD rates in January 1984.

Of course you can earn more than that if you use our extensive database of CD rates to search for better-than-average deals.

But the best rates you’ll find today are no better — and sometimes worse — than the average rates we were earning last summer and fall.

The problem continues to be the Federal Reserve, which is providing the nation’s commercial banks with all the cheap money they could possibly need.

The government-controlled bank has dropped what it charges commercial banks to borrow money to rock-bottom levels, charging from 0% to 0.25% for overnight loans.

The Fed did that to save the banking industry from its self-inflicted crisis and help the economy recover from the recession that crisis caused.

But there’s no getting around it. Pushing interest rates artificially low makes savers pay a stiff price for the banks’ reckless lending practices of the early 2000s.

How do we know that banks would be forced to pay more for deposits if they had to get their money on the open market?

Interest rates on government bonds are going up. Rates on the 10-year Treasury bill, for example, peaked over 4% this week for the first time since November.

Yet CD rates are going down.

Any sign the Fed might reverse course and start pushing rates up anytime soon?

Not really.

While things are certainly looking up — more banks are returning to profitability, fewer workers are losing their jobs — the recession and financial crisis are far from over.

Money market traders think there’s only a 12% chance that the Fed will raise rates by even a quarter point in September, and only a 48% chance it would do so in November.

In a rare interview with “60 Minutes” on Sunday, Fed Chairman Ben Bernanke said the financial system is recovering, but not yet back to normal.

He gave no indication that he was ready to let interest rates rise to more reasonable levels and reward savers with more lucrative certificates of deposit.

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