Dedicated to Deposits: Deals, Data, and Discussion

Increasing Odds for an August Fed Funds Rate Hike


With Bernanke's latest tough anti-inflation talk, the expectations of a Fed Funds rate hike later this year are increasing. Federal funds futures are now predicting about a 40% chance of a 25-basis-point increase at the FOMC August meeting. The next FOMC meeting is at the end of this month, and the general consensus is that the Fed will keep rates unchanged.

The higher likelihood of rate increases means that you may want to avoid long term CDs. With the possibility of an August rate increase, even a 6-month CD may appear too long. However, if rates rise during the end of your CD term, you still might come out ahead with a CD that has a rate above savings account rates during the first part of the term.

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Comment #1 by Bozo (anonymous) posted on
To: All
Re: My $.02 on rates

I suppose I follow rates along with everyone else. Don't claim to have a crystal ball, or as much expertise as BankingGuy, but I've done OK so far timing ups, downs, etc.

My rule of thumb always is: when the FED pauses, and sends "signals", you're looking at the end of whatever is going on (rate hikes, rate decreases). I also look at bond traders, to see what the market is doing.

All these "signals" indicate to me rates are going up from here. I would agree to avoid anything over one year. I suspect we'll be seeing 5.5% or 5.75% CDs for terms of 5 years or more in short order.

Anything over 5% is a gift, so this would be good.



Comment #2 by Anonymous posted on
I agree with Bozo (above poster.) I have timed the ups and downs of interest rates in a similar manner as Bozo, and perhaps I'm just lucky, but I've managed to still have all of my banking money in over 5 pecent instruments even with the current conditions. Some of my money is still getting 6 percent. Banking Guy gets a lot of credit for helping me do this as well.

Comment #3 by Anonymous posted on
It's long past time for interest rates to rise. This will help, too, with the cost of gasoline and all petroleum products. When winter comes, many who still heat with oil will benefit. It's about time our government supports our US dollar. I think these very low interest rates are artificial and are the fault of an aggressive and obsessive Fed.