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Fed Ups Rates, How Fast Will Banks Respond?


The Fed did what everyone expected and raised interest rates 0.25% today to 4.00%. In addition, the Fed continued to use the term measured pace in describing its expectation for future changes. So it looks likely we'll see quarter-point moves in the next meetings on December 13, 2005 and January 31, 2006.

Now the question is how fast will banks respond. Immediately after the last rate hike by the Federal Reserve, EmigrantDirect raised its savings account rate from 3.50% to 4.00%. Unfortunately, EmigrantDirect didn't do the same today. As I mentioned in this post, it's my opinion that EmigrantDirect won't raise its savings account rate anymore this year. Based on its rate history this year, EmigrantDirect seems to prefer fewer rate changes.

One of the few banks that did make changes today is Corus Bank. Corus Bank constantly tweaks its rates so it's probably not directly tied to the Fed. Its money market account for balances under $100K increased from 3.92% to 3.96% APY. Also its CD rates increased. The 6-month CD went from 4.30% to 4.35% APY; the 12-month CD went from 4.60% to 4.65% APY.

My guess is that ING Direct will soon make another increase in its Orange Savings Account rate. Perhaps it'll finally reach 3.50% this week.
Anonymous   |     |   Comment #1
world savings = %4.10 for 4 months CD (not bad)

Banking Guy
Banking Guy (anonymous)   |     |   Comment #2
Thanks for the info. Yes, that 4-month World Savings CD is a good deal now.

World Savings also has a 5-month 4.65% CD that's not being advertised. Refer to this post for more info.