bank rates

CD Rates Plunge Lower This Week

Bankaholic.com Most CD rates continued to fall this week as Federal Reserve Chairman Ben Bernanke gave no indication he was ready to reverse that trend.

Bankrate’s weekly survey of large banks and thrifts taken July 22 found the average annual yield for a:

Three-month CD declined to 0.51% from 0.53% the previous week. That’s the lowest average since Bankrate began tracking 3-month CD rates in March 1989.

Six-month CD fell to 0.77% from 0.79% — the lowest average since Bankrate began tracking 6-month CD rates in January 1984.

One-year CD fell to 1.08% from 1.10% — the lowest it’s been since August 2003.

Two-year CD fell to 1.52% from 1.53%. Last month it fell to 1.46%, the lowest 24-month CDs have been since August 2003.

Five-year CD rose to 2.16% from 2.15% — the lowest rates since Bankrate began tracking 5-year CDs 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.

The Federal Reserve is pushing interest rates artificially low to boost spending and rescue the financial industry from its reckless lending binge of the early 2000s.

To do that, the government-controlled bank has dropped what it charges commercial banks to borrow money to rock-bottom levels — 0% to 0.25% for overnight loans.

With the government providing so much cheap money, the banks can pay next to nothing for our deposits.

We shouldn’t expect rates to start climbing again anytime soon based on what Bernanke said in two days of testimony before House and Senate committees in Washington.

The Fed chief told lawmakers that the central bank is prepared to raise rates — and nip inflation in the bud — once a recovery is firmly rooted.

But his focus remains “fostering economic recovery,” Bernanke told Congress, and will probably remain so until the unemployment rate peaks and begins to drop.

That’s something most economists don’t expect to see until next spring or summer.

So it’s not surprising that Bernanke wrote in an opinion piece in Tuesday’s Wall Street Journal that “economic conditions are not likely to warrant tighter monetary policy for an extended period.”

It sounds like the best we can hope for CD rates to stop falling and bottom out this summer. This fall? Before Christmas?

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