Fed Keeps Pounding Down CD Rates

Savers struggling with record-low CD rates got no help from the Federal Reserve this week.

The Fed’s rate-setting committee renewed its pledge to keep interest rates artificially depressed for an “extended period” to ensure a strong economic recovery.

The committee acknowledged the economy has “continued to pick up” and that “deterioration in the labor market is abating” since employers are laying fewer workers off this fall.

But the Fed said it would continue to boost growth and job creation by charging commercial banks 0% to 0.25% for overnight loans.

As long as the government-controlled Fed provides commercial banks all the money they need for virtually nothing, those banks can pay a pittance for our savings.

No wonder four of the five certificates of deposit we follow fell to new record lows in Bankrate’s Dec. 16 survey of large banks and thrifts. The average annual yield for a:

3-month CD fell to 0.37% from 0.38% this week. That’s the lowest average since the survey began tracking 3-month CD rates in March 1989.

6-month CD fell to 0.51% from 0.52% — the lowest average since the survey began tracking 6-month CD rates in January 1984.

1-year CD fell to 0.82% from 0.83% — the lowest average since the survey began tracking 12-month CD rates in October 1983.

2-year CD fell to 1.26% from 1.28% — the lowest average since the survey began tracking 24-month CD rates in March 1989.

5-year CD held at 2.08% after falling for four straight weeks. The 2.08% is the lowest average rate since the survey began tracking 60-month CDs in January 1984.

With average rates like this you can’t settle for average returns.

Use our database of CD rates to find and compare the best deals from scores of banks.

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Washington Fed Pays 2.50% On 2-Year CD

Here’s another example of the competitive CD rates we’re finding in the Pacific Northwest.

Seattle-based Washington Federal Savings is paying a 2.50% APY on a 24-month CD with a minimum deposit of $1,000.

If this deal was nationally-available, it would be near the top of our rankings of the best 24-month CD rates.

But it’s not and you can’t apply online.

To open an account you’ve got to visit one of Washington Federal’s 124 branches in eight Western states.

This certificate of deposit is also available at a couple of banks it owns — First Mutual Bank, with 13 branches in Washington, and First Federal Bank, with 13 branches in New Mexico.

Since Washington Federal doesn’t even post CD rates on its Web site, call your local branch to confirm it’s still being offered before making the trip.

Click here for the address and phone number of the one nearest you.

You can use our extensive database of CD rates to compare this offer with the best deals from scores of banks.

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No Relief From Fed As CD Rates Fall Again

CD rates resumed their decline this week, with short-term rates falling to new, record lows.

There’s no reason to think the broad and precipitous decline that began two-years ago will reverse itself this year — or even in early 2010.

The Federal Reserve’s rate-setting committee met on Wednesday and said the severity of the recession will force it to keep interest rates “exceptionally low” for “an extended period.”

Bankrate’s weekly survey of large banks and thrifts taken Aug. 12 found the average annual yield for a:

Three-month CD declined to 0.49% from 0.51% the previous week. That’s the lowest average since Bankrate began tracking 3-month CD rates in March 1989.

Six-month CD fell to 0.75% from 0.76% — the lowest average since Bankrate began tracking 6-month CD rates in January 1984.

One-year CD fell to 1.06% from 1.07% — approaching the record low of 1.03% set in July 2003.

Two-year CD held at 1.51% for the second week. The average rate declined to 1.46% in June, the lowest 24-month CDs have been since August 2003.

Five-year CD fell to 2.16% from 2.18%. That’s only a tick above the 2.15% reached earlier in July, which was lowest average rate since Bankrate began tracking 60-month CDs in January 1984.

Of course you can earn more than that if you use our extensive database of CD rates to search for better-than-average deals.

But the sorry fact is that the best rates you’ll find anywhere right now are lower than the average rates we were enjoying last summer and fall.

Last week’s survey was the first since Oct. 8 in which none of those five rates declined — three held steady and two increased.

At the time we said that wasn’t enough to think CD rates have hit bottom. “We’ll need at least a few more surveys like this to draw such a conclusion.”

Unfortunately, we didn’t get even a second week of stable or slightly rising rates to encourage the idea that all CD rates might be bottoming out.

The most optimistic trend we can point to is that long-term rates — those for 24- and 60-month CDs — have not fallen past the lows they established in June and July. So perhaps they’re stabilizing.

That is certainly not the case for short-term rates, which continue to leave us wondering: How low can they possibly go?

The Federal Reserve has been pushing interest rates artificially low as part of its effort to rescue the financial industry from its reckless lending binge of the early 2000s and the recession it created.

To do that, the government-controlled bank has dropped what it charges commercial banks to borrow money to rock-bottom levels — 0% to 0.25% for overnight loans.

With the government providing so much cheap money, the banks can pay next to nothing on certificates of deposit, money market and savings accounts.

The statement released after the Federal Reserve’s Open Market Committee met Wednesday sounded a hopeful note, saying that “economic activity is leveling out. Conditions in financial markets have improved further in recent weeks. Household spending has continued to show signs of stabilizing.”

The Fed even said it will gradually phase out its program to buy $300 billion worth of Treasury bonds between now and the end of October — the first major economic stimulus effort to be phased out.

But the statement listed all of the economic indicators that are not going well, everything from a continuing contraction of the labor market, sluggish income growth, declining home values and business investment.

Fighting the recession is still the Fed’s top priority, the statement said, which means raising the overnight loan rate — the first step to higher CD rates for investors — isn’t even on the horizon.

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