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Fed Holds As Expected - Effect on Savings Accounts? CD's?


The Fed held the fed funds rate at 5.25% today. This is the fourth straight meeting it had held the rate steady. The last rate hike was on June 29th (see fed funds rate history).

This CNN article has some a good overview of today's meeting and what we may see in the future. One economist was quoted as saying:
There really was nothing much new here. The Fed still expects the economy to bounce back although there was a little more attention to the softening of the housing market.

The consensus seems to be that rates will continue to hold steady until mid next year when we may see the Fed start cutting rates.

With the fed funds rate holding steady, short term rates on savings accounts should also hold steady. However, we may see some more declines in CD rates. The CNN article ended with the following:
Some bond investors seem to be betting that the economy is weakening and that the Fed should be lowering rates to stave off the risk of a significant slowdown. The fed funds rate is currently higher than the 10-year bond rate and other long-term rates. This phenomenon is known as an inverted yield curve and has typically been a predictor of a recession.