By  Thu Jan 3, 2013

CD Rates Report Dec. 2012: Watch the Unemployment Rate

Fairfax County / Flickr | http://www.flickr.com/photos/fairfaxcounty/5595033635/

Fairfax County / Flickr source

To no surprise, the rates on certificates of deposit (CDs) maintain their downward spiral, but fortunately, at a slower pace than usual. In December, the national rate averages for most CD terms fell by a very slight 0.01% APY, according to bank data by MyBankTracker. But, since we’re already dealing with extremely low interest rates, even the smallest rate drops appear significant.

For avid watchers of CD rates, there is some good news. It appears that longer-term CD rates have stopped experiencing large cuts — a trend that has stuck around in recent months because rates on shorter CD terms have less room to fall (without appearing less attractive than savings accounts).

In December, Chase, Citibank and Capital One were some of the bigger banks that have slashed CD rates: Chase’s entire line of CDs suffered rate cuts. Notable leaders in online banking — including Ally Bank, CIT Bank, Discover Bank, Doral Bank Direct and AIG Bank — also reduced rates on many of their CDs. Usually, it’s not a good sign when rates dwindle at some of our biggest and most popular banks.

The Federal Reserve did not announce any more changes to monetary policy following its December board meeting. However, the central bank revealed the economic indicator that will determine when interest rates will rise again: the unemployment rate. It is likely that interest rates will remain at their currently-low levels “at least as long as the unemployment rate remains above 6.5 percent,” the Fed said.

Central bankers don’t expect the jobs market to reach this economic threshold until 2015.

Savers who want to lock in their money in a long-term CD are advised to do so as soon as possible. Those who wish to stick with short-term alternatives may prefer a high-yield savings account, or maybe Series I savings bonds.

The table below shows the changes in the national average for CD rates from Nov. 30, 2012 to Dec. 31, 2012. The figures are based on data acquired from banks that are tracked here on MyBankTracker.

CD Term APY (as of 11/30/12) APY (as of 1/1/13) APY Change
6-Month 0.38% 0.37% -0.01%
12-Month 0.54% 0.53% -0.01%
24-Month 0.67% 0.66% -0.01%
36-Month 0.85% 0.83% -0.02%
48-Month 1.01% 1.00% -0.01%
60-Month 1.22% 1.21% -0.01%

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