CD Rates Report January 2012: More Downside on the Horizon

Simon Zhen

Updated on Mon Jul 14, 2014

Compared to last month, the first month of 2012 showed signs that the rates for certificates of deposit (CDs) will begin to fall after a very brief slowdown. That may just be the early effects of the Fed’s decision to reveal target rate predictions.

For the Federal Reserve, January 2012 is marked down as a momentous month in the pages of history.

With the first public release of target fed funds rate projections, the central bank revealed that the majority of board members expected that the next rate increase won’t arrive until 2014.

That’s two more years of terrible returns on CDs.

In August 2011, the Fed said rates were going to stay “exceptionally low” until mid-2013. The announcement sent CD rates crashing. Currently, the target federal funds rate stands at 0 to 0.25 percent, unchanged since December 16, 2008.

Thanks to the rather pessimistic rate projections, banks are armed with knowledge that is likely to convince them to lower CD rates further. It was premature to assume that the stagnant movement of last month’s CD rates was a signal of a bottom, something that will probably achieved in the next 12 months.

In a January press conference, Fed Chairman Ben Bernanke recognized that interest rates are “pretty low” but they’re still positive enough to compensate for inflation.

“I would reiterate that we are not unaware of the problems that low interest rates cause for savers, cause for pension fund contributions, insurance companies, and other parts of the economy and we do try to take that into account as we think about other ramifications of our policy,” he said in response to a reporter’s question.

Falling Faster

The table below shows the changes in national CD rates averages from December 30, 2011 to January 31, 2012. The figures are based on data acquired from banks that are tracked here on

CD TermAPY (as of 12/30/11)APY (as of 1/31/12)APY Change

As we watch CD rates fall more and more, there will be less of an incentive to lock in money into a time deposit.

At this rate of decline, we may see 1-year CD rates average under 0.50% APY nationwide. Savers may simply give CDs the cold shoulder altogether and keep savings in a liquid savings account.


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