bank rates

Most CD Rates Tick Lower This Week

As CD rates continued their long decline this week, Wall Street traders and economists are divided on how much longer the decline will last.

Bankrate’s weekly survey of large banks and thrifts taken Oct. 14 found the average annual yield for a:

Wall Street traders and economists are divided on how much longer the decline in CD rates will last.3-month CD remained at 0.41% for the second week. But that’s the lowest average since the survey began tracking 3-month CD rates in March 1989.

6-month CD fell to 0.60% from 0.61% — the lowest average since the survey began tracking 6-month CD rates in January 1984.

1-year CD fell to 0.92% from 0.93% — the lowest average since the survey began tracking 12-month CD rates in October 1983.

2-year CD fell to 1.42% from 1.43% — the lowest average rate since July 2003.

5-year CD remained at 2.23% for the second week. That’s slightly above the 2.15% reached in July, which was lowest average rate since the survey began tracking 60-month CDs in January 1984.

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Investors are suffering because the Federal Reserve is pushing interest rates artificially low save the banking industry from its reckless lending and boost the economy out of the Great Recession.

To do that, 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.

Futures contracts tied to the Fed’s overnight rate indicate that money market traders think it will set the floor for overnight loans at 0.25% in January, and that there’s a 40% chance it will raise the rate a quarter-point in March.

They base that opinion on the improvements they’re seeing in the banking industry and projections that the recession has ended.

But many economists argue that Fed Chairman Ben Bernanke will be far more cautious.

They say he won’t want to raise interest rates until he’s sure the economy is no longer losing jobs and the unemployment rate is declining. They don’t expect to see a recovering job market until mid-2010.

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