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GDP Growth Slows - Effect on Fed and Rates?


The GDP report that came out today shows that the economy grew in the fourth quarter at only 1.1%, its slowest pace in three years. Economists had forecasted a 2.8% growth rate. As mentioned in this CNN article, this may serve as an incentive to stop the Fed from overshooting the rate hikes. The Fed is expected to raise interest rates once more in its next meeting on Tuesday. This news makes it more likely the Fed may stop the rate hikes after this meeting. However, the GDP report also showed that inflation had risen in the fourth quarter. So there is still uncertainty.

High much higher will money market and CD rates go this year?

This year will likely not match last year's constant increases in money market and savings account rates. Even with all the short-term rate increases last year, longer term CD rates didn't move much. It's still not easy to find CDs with rates over 5%, and this trend is not changing. Several banks have slightly reduced long-term CD rates in the last month. The highest 5-year CD that's nationally available is 5.75% from Penfed. However, the highest rate listed at Bankrate.com is only 5.05% APY with only 7 banks at or above 5% APY. Penfed states that the current rates are good till February. I wouldn't be surprised if 5.75% goes away after that.