Dedicated to Deposits: Deals, Data, and Discussion

Fed Continues to Keep Rates Unchanged

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The Fed decided to keep the target for the federal funds rate at 2% today. The general consensus had long been for the Fed to hold, but with the recent financial turmoil, there had been increasing expectations for a rate cut. However, it appears from the Fed's statement, they felt that a rate cut would have been more harmful to inflation than it would be beneficial to the financial markets.

One thing interesting to note in the Fed's press release is that the FOMC member Richard Fisher voted for maintaining the current rate. He has long been a inflation hawk, and in the last Fed meeting he had voted for a rate increase. With energy costs going down and with financial market turmoil increasing, my guess is that it's going to be a long time before we see a rate hike.

With banks in need of deposits, we should continue to see some good savings account and CD deals, but I doubt we'll see any widespread rate increases.

There are 2 more FOMC meetings scheduled for this year: October 28-29 and December 16.

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Comments
5 comments.
Comment #1 by Anonymous posted on
Anonymous
Boy I hope this decision holds and that Bernanke does not lower rates between meetings. If they had lowered rates today the value of the dollar would have PLUNGED. All savers had a good day today. But the future is uncertain.

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Comment #2 by Anonymous posted on
Anonymous
I have a question. My son and I both have brokerage accounts at 5th/3rd Bank. They are Muni bonds, and mutual funds. If 5th/3rd fails will these holdings be safe or will they go into receivership or whatever with the bank? I could call 5th/3rd but am not sure I trust their answer to be true. Thanks

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Comment #3 by Anonymous posted on
Anonymous
To: anon@12:43 PM

The short answer is No - brokerage accounts are NOT covered by FDIC insurance.

Now, the brokerage division may have some other type of insurance (the most common is SIPC), but FDIC does not cover brokerage accounts since they are not bank deposits.

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Comment #4 by Anonymous posted on
Anonymous
The rate cuts didn't help to lower interest rates anyway. The advantage is that the savings rates are going up even though there have been no rate hikes.

It's nice that we have been able to take advantage of the misfortunes of WaMu and Countrywide.

I'm hoping that interest rates do drop by this time next year so I can do a cash-out refinance (on my home) and buy some more investment land.

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Comment #5 by Anonymous posted on
Anonymous
12:43 you need to speak with your broker, regardless who it is. It's likely SIPC insurance is in force which will give you some coverage. But you need to ASK!!! You don't say the value of your brokerage account(s). If it is too high, you might be beyond the SIPC coverage, which tops out at $0.5M I think (not sure). If you are, get down inside the SIPC coverage limits PRONTO!! You should not be holding bonds or mutual funds in an uninsured account - very bad idea.

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