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Future Fed Rate Hikes and EmigrantDirect


Newly released employment data shows robust employment growth for November. As this article mentions, this news makes it more likely that the Fed will continue with its rate hikes into 2006. Below is a quote from the article:

"This is the first clean reading on employment we have had since the hurricane season distortions and it is pretty encouraging. It adds to evidence that the US weathered the hurricanes pretty well," said Nigel Gault, head of US research at Global Insight. "Had we seen a weak number this would have made it more likely that the Fed would take a break from rate rising after the next 2 meetings. They are likely to want to see a few more months of clean post-hurricane data before making up their minds."

The next Fed meeting is December 13th. With another 0.25% increase in the Federal funds rate, which bank will be the first to react? It would be nice if we get a repeat of EmigrantDirect's rate hike of last September 20th.

Before September 20th, EmigrantDirect had let many of its competitors pass them on the savings account rate. Even ING Direct Orange Savings Account was within 0.20% of EmigrantDirect. Other banks had been 3.75% for over a month while EmigrantDirect remained at 3.50%. Then on the day that the Fed raised the Funds rate to 3.75%, EmigrantDirect responded with a 0.50% increase to its savings account rate. Since that day on September 20th, EmigrantDirect hasn't changed. Meanwhile, many other banks have raised savings and money market account rates to 4.00% and above. So it's time for another big move by EmigrantDirect.
Nick (anonymous)   |     |   Comment #1
Another question is what the rate increase from ED will be. 4.25%? 4.5%? I can't see them thinking they'll remain competitive if they only bump up another 0.25% because they'll quickly fall behind again. On the other hand, a 0.25% increase might be enough to appease those with their finger on the "transfer out of ED" button because they don't want to take a chance with yet another bank.
Banking Guy
Banking Guy (anonymous)   |     |   Comment #2
Based on history, they might just do a 0.25% increase. They've done two 0.25% increases this year and just one 0.50% increase in September.

They get a lot of free advertising when they do a big rate bump. It happened when they first started last January with 3% and then again last September with 4%. If they want more of this, they'll need to do a 0.50% increase.