The Federal Reserve has not touched interest rates throughout 2011 and doesn’t expect to do so before mid-2013. Meanwhile, the interest rates on certificates of deposit (CDs) have slipped considerably, convincing Americans against keeping their money in such deposit commitments.

CD rates are still on the downward path that they embarked upon after the Fed began a string of federal funds rate reductions in 2007. From the beginning to the end of 2011, national CD rates averages have declined by at least 0.12% APY (0.21%).

Compared to 2010, CD rates in 2011 did not fall as much, but the drop is significant enough to put a frown on savers’ faces.

Also, many Americans who invested more in the stock market because of low savings rates did not find greener pastures — the S&P 500 lost 5.4 points, or 0.4%, in 2011.

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The Fed’s Hammer

The Federal Reserve is maintaining a steadfast position on its monetary policy. In an unorthodox move in August, the Fed announced that the federal funds rate is projected to remain unchanged until the middle of 2013, which means roughly another 18 months of depressingly low CD rates (and all deposit rates in general).

In that very month, national CD rates averages suffered the biggest drop in 2011 when banks responded to the news from the Fed.

Even the popular 5-year CD from Ally Bank, often praised for offering great rates, experienced a fall to its current 1.79% APY from 2.39% APY at the beginning of the year. On $10,000, that is a difference of $60.

The table below shows the annual change of the national daily averages for CD rates from January 7, 2011 to December 30, 2011. The figures are based on the data acquired from banks that are tracked here at

CD TermAPY (as of Jan. 7, 2011)APY (as of Dec. 30, 2011)APY ChangePercent Change
6-Month0.54%0.42%- 0.12%- 22%
12-Month0.76%0.60%- 0.16%- 21%
24-Month1.03%0.77%- 0.26%- 25%
36-Month1.40%0.99%- 0.41%- 29%
48-Month1.69%1.17%- 0.60%- 31%
60-Month2.05%1.47%- 0.58%- 28%

Did you open up a new CD last year? If yes, what was your reason for doing so amid such low rates?

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Simon Zhen

Simon is a research analyst for MyBankTracker. He is an expert on consumer banking products, bank innovations and financial technology.
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