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Fed Lifts Rates, No Change at EmigrantDirect


The Fed did what was expected and raised the Fed funds rate by 0.25% for the 13th straight time. However, the Fed removed the use of accommodative in its language which is a signal that the rate hikes may be coming to an end. Another 0.25% hike is still anticipated for January 31, but for the meeting in March, future markets lowered the odds of another rate hike from 66% to 60%.

Unfortunately, EmigrantDirect didn't do a repeat of the 0.5% rate increase that it did on the September 20th Fed rate hike. During the late summer, EmigrantDirect had fallen behind many other banks (see chart). Before September 20th, many banks had raised their savings account rates to 3.75% while EmigrantDirect savings account rate remained at 3.50%. Then right after the Fed did their rate hike to 3.75%, EmigrantDirect did the big rate bump.

After skipping a rate bump on the Fed's November 1st rate hike and after falling behind many other banks once again, I was hoping for a repeat of September 20th. Looks like we'll have to continue to wait. The other two times EmigrantDirect raised its savings account rate this year, it didn't immediately follow the Fed rate hike. So perhaps it'll come in the next few weeks.

Will EmigrantDirect want to stay on top of the saving account rates? Will it become like an ING Direct in which being on top is no longer a priority? If it has plenty of cash, it may not need to raise rates. But as I mentioned in this previous post, 40% of EmigrantDirect customers have other online savings accounts. It's easy to move the money. Hopefully, this competition will help keep savings account rates high.