bank rates

CD Rates Rally A Little This Week

CD rates ticked up this week, but the Federal Reserve says it’s not even close to helping savers earn bigger returns on their deposits.

CD rates ticked up for the first time this week in our latest survey of returns from major banks and thrifts.The Fed’s rate-setting committee met Wednesday and reiterated its determination to keep interest rates at or near record lows “for an extended period of time”.

Bankrate’s weekly survey of large banks and thrifts taken Sept. 23 found the average annual yield for a:

3-month CD held at 0.43% for the second week. That’s the lowest average since the survey began tracking 3-month CD rates in March 1989.

6-month CD rose to 0.63% from 0.62% — the lowest average since the survey began tracking 6-month CD rates in January 1984.

1-year CD rose to 0.96% from 0.94% — the lowest average since the survey began tracking 12-month CD rates in October 1983.

2-year CD rose to 1.46% from 1.43% — the lowest average rate since August 2003.

5-year CD rose to 2.26% from 2.19%. That’s still slightly above the 2.15% reached in July, which was lowest average rate since the survey began tracking 60-month CDs in January 1984.

But don’t read too much into that.

We’ve seen little upticks like this before and the best we can say is that long-term rates may have finally bottomed out after declining for almost two years.

We’ll need at least a few more weeks of flat or slightly higher results to conclude that short-term rates have also reached their nadir.

(Use our extensive database of CD rates to compare the best deals from scores of banks.)

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.

It decided to stop buying Treasury bills in October, an effort that has helped to hold down rates on those investments. But it will continue buying billions of dollars in mortgage debt through March 2010.

The Fed will almost certainly end those purchases before raising the overnight rate and allowing savers earn substantially better returns on their CDs and other deposits.

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