When Will Online Savings Account And Certificate of Deposit (CD) Rates Go Up?
For many money-savvy Americans, the current interest-rate environment is very frustrating. Imagine spending years being frugal and responsible with your money, spending as little as you can and saving as much as you can, only to be rewarded with a savings account rate of 1.25%. Very frustrating indeed. Even online savings accounts, which typically offer better yields than traditional savings accounts, are offering less than 2%. The situation with Certificates of Deposit (CD’s) is no better. The reason for the lousy rates is quite simple: the Federal Reserve is currently letting banks borrow at no more than 0.25%. So, if a bank can borrow at 0.25% — which is the current fed funds target rate — why would it borrow money from you at 5% via a savings account or a CD? That’s the gist of it. This is why CD and savings-account rates rise as fall in tandem with the target fed funds rate, the Fed’s most important monetary policy tool. So the big question is: when will savings rates start to r
