The latest release of a core economic index indicates a modest rise in inflation — meaning that the purchase of Series I savings bonds in the next two weeks can lead to attractive interest earnings after one year.

Act quick and savers could grab a rate of 2.10% APY if these I-bonds are redeemed in April 2013.

According to the Bureau of Labor Statistics, the Consumer Price Index for All Urban Consumers (CPI-U) was 226.889 in September 2011. The CPI-U was 229.392 for March 2012 — marking an inflation rate of 1.103% during the last six months.

The semiannual inflation rate is one component of the formula used by the Treasury Department to determine the composite rate on Series I savings bonds. The other component — a fixed rate — has been at 0% since November 2010.

The composite rate is determined by the following formula:

  • Composite rate = [fixed rate + (2 x semiannual inflation rate) +(fixed rate + semiannual inflation rate)]

The 6-month composite rate for I-bonds bought before May 1, 2012 is 3.06%. Assuming that the fixed rate for May-September 2012 is 0%, the composite rate for the next round of I-bonds will be 2.21%.

If I-bonds are purchased in the next two weeks, bondholders earn a composite rate of 3.06% for the first six months and 2.21% for the following six months. After a penalty of 3 months’ interest (for redeeming I-bonds within five years), I-bonds pay out an effective 2.10% APY if they are redeemed in April 2013.

According to the banks tracked by MyBankTracker, 1-year CDs pay an average of 0.54% APY and savings accounts pay an average of 0.34% APY. Currently, the highest nationally-available savings rate is 1.25% APY from TIAA Direct. The highest nationally-available 1-year CD rate is 1.15% APY from Doral Bank Direct.

Buying I-bonds between May and November 2012 would yield a 1.11% APY if the composite rate is 0% for the subsequent six months and the bonds are redeemed in one year.

Anyone who is a U.S. citizen with a Social Security number may purchase up to $10,000 in Series I savings bonds per calendar year.

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