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Fed Holds Rates Steady - CD Rate Predictions?


As expected, the Fed held interest rates steady today. It was the third straight FOMC meeting in which the target fed funds rate was held at 5.25%. The question remains about the future. Opinions expressed in this CNN article don't see any change in the near term since the economy appears to be in reasonable health. Another pause is expected in the Fed's December meeting and then maybe rate cuts sometime next year. It's now looking like the cuts will be later in the year rather than earlier.

As you can see in this 1-year average CD interest rate graph, the trend of falling CD rates that we've experienced since the start of August may have ended. Treasuries have also been on the rise over the last month or two (see table). With the Fed appearing to be in a holding pattern for some time and with a reasonably healthy economy, we may see some slight rise in CD rates over the next few months. Perhaps we'll see an end to the inverted yield curves with some higher rates on long-term CDs.
Mario (anonymous)   |     |   Comment #1
I read the CNN article too and thought the second half of it was quite biased and the causes and implications of rate cuts or hikes based on debatable opinions.

From what I read, it's likely that core inflation will go down towards the end of the year from now, but may reappear (even stronger) early next year. The severity of core inflation then may prompt another rate hike (or two), else the Fed will probably stay on hold. My opinion is that we might see CD rates decline further, but rebound early next year, perhaps then surpassing what we have now.