CD rates ended an abysmal year by falling for the 26th straight month in December.
All five of the certificates of deposit we track reached record lows during December, and four of the five average CD rates were down for the month.
The one exception was for 5-year certificates of deposit, whose average return actually ticked up from 1.51% at the end of November to 1.56% at the end of December.
But we’ve seen blips like this before, and they have not signaled a change in the overall downward trend for all CD rates.
That’s because the Federal Reserve seems determined to hold interest rates at unprecedented lows for the foreseeable future.
A majority of economists polled in a recent CNNMoney.com survey said the Fed funds rate — the central bank’s key interest rate for controlling overnight loans between banks — will remain near 0% for at least another year.
Only seven out of 25 economists are forecasting a rate hike in the next 12 months, and most of those expect it to come in the final three months of 2011. Another nine expect the next rate increase to come in the first quarter of 2012, while eight more are expecting a hike later that year.
Bankrate’s final December survey of large banks and thrifts found the average annual yield for a:
3-month CD ended the month at 0.20%, down from 0.23% at the end of November and down from 0.36% at the start of the year. That’s the lowest average since the survey began tracking 3-month CD rates in March 1989.
6-month CD fell to 0.30%, down from 0.31% the previous month and 0.50% at the start of the year. That’s the lowest average since the survey began tracking 6-month CD rates in January 1984.
1-year CD fell to 0.48%, down from 0.51% the previous month and 0.82% at the start of the year. That’s the lowest average since the survey began tracking 12-month CD rates in October 1983.
2-year CD fell to 0.74%, down from 0.77% the previous month and 1.24% at the start of the year. The 0.73% reached in early December was the lowest average since the survey began tracking 24-month CD rates in March 1989.
5-year CD rose to 1.56% from 1.51% at the end of November. But it was still down from 2.10% at the start of the year, and the 1.50% reached in early December was the lowest average rate since the survey began tracking 60-month CDs in January 1984.
Compare these returns with the best CD rates from scores of banks in our database.