CD Rates Punish Savers Again This Week

Short-term CD rates took another plunge this week, with the average return on 12-month CDs falling below 1% for the first-time ever.

With 2-year and 5-year CDs more or less holding their own for the past several months, it appears that long-term rates have probably bottomed out.

But the Federal Reserve’s relentless campaign to push interest rates lower to help the big banks survive last autumn’s financial crisis continues to punish savers and there’s no indication it’s going to take its foot off our throats anytime soon.

Bankrate’s weekly survey of large banks and thrifts taken Sept. 2 found the average annual yield for a:

3-month CD declined to 0.45% from 0.46% the previous week. That’s the lowest average since the survey began tracking 3-month CD rates in March 1989.

6-month CD fell to 0.68% from 0.71% — the lowest average since the survey began tracking 6-month CD rates in January 1984.

1-year CD fell to 0.98% from 1.01% — the lowest average since the survey began tracking 12-month CD rates in October 1983.

2-year CD fell to 1.47% from 1.49%. The average rate declined to 1.46% in June, the lowest 24-month CDs have been since August 2003.

5-year CD remained at 2.23% for the second week. That’s somewhat above the 2.15% reached in July, which was lowest average rate since the survey began tracking 60-month 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.

But the sorry fact is that the best rates you’ll find anywhere right now are lower than the average rates we were enjoying last summer and fall.

The Federal Reserve has been pushing interest rates artificially low as part of its effort to rescue the banking industry from its reckless lending binge of the early 2000s and the recession it created.

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 on certificates of deposit, money market and savings accounts.

Much to our dismay, President Obama recently nominated Chairman Ben Bernanke for a new term at the Fed’s helm.

Although senators from both parties will undoubtedly grill Bernanke about his failure to anticipate and prevent the banking industry from going off the rails, he’ll almost certainly be confirmed.

No accountability here. So there’s little reason to expect the Fed’s big bank-lovin’, little saver-punishin’ policies will change on this president’s watch.