National averages of certificates of deposit (CD) rates continue to show signs of stagnation, as rate averages moved little in the prior month. Market murmurs, however, fueled speculation that the Federal Reserve may take measures to push interest rates even lower.
In June, national averages of 12-, 24- and 36-month CD rates were unchanged, while longer-term CD rates suffered a slight drop. That has been a trend in the past year — the return for keeping money in a longer-term CD is dwindling. Meanwhile, shorter-term CDs are offering slightly higher rates compared to high-yield savings accounts to compensate for the time commitment involved.
In its latest board meeting, the Federal Reserve maintained its stance on monetary policy. The currently-depressed interest rates are projected not to rise until late 2014, which has been the outlook since January. The central bank extended a program, involving the swapping of short-term Treasury securities with longer-term counterparts, to help push interest rates even lower.
Recognizing that economic growth has slowed in recent months, the Fed is “prepared to take further action as appropriate to promote a stronger economic recovery” — fueling market speculation that another round of quantitative easing may come, which could put more downward pressure on interest rates.
So, while the minimal movement in rate averages may indicate a bottom, we are still one and a half years from the time when we can expect greater returns on our savings. In the meantime, interest rates will be at the mercy of the economy’s health.
Doral Bank Direct continues to offer the leading 12-month CD rate at 1.15% APY. Barclays online bank has a 5-year CD that doles out 1.80% APY. The slight rate advantage for committing to longer terms appears to be growing less appealing. Savers may be better off keeping money in an online savings account.
The table below shows the changes in average national CD rates from May 31, 2012, to June 30, 2012. The figures are based on data acquired from banks that are tracked by MyBankTracker.
|CD Term||APY (as of 5/31/12)||APY (as of 6/29/12)||APY Change|