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What to Expect from CDs and Money Market Accounts in 2007?

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This Bankrate.com article gives some predictions by financial professionals about what to expect next year for CD and money market rates. One of the experts doesn't see much change in the short term rates and recommends against locking into a long-term CD that doesn't give much of a premium over the money market accounts. Another expert thinks the Fed is done and recommends those who have been buying short-term CDs should start to consider CDs with maturities from 2 to 3 years. He also recommends people consider more stock and mutual funds to their portfolio. Another expert recommends a barbell CD laddering approach in which most of your CD maturities are concentrated in the maturities of 1-year and under and in maturities of 4 and 5 years. With inverted yield curves, it's tempting to keep all your money liquid, but if the housing market tanks, the low interest rates of 2003 could return.

As you can see from these experts, there's no clear cut prediction. As usual, the best approach is an investment allocation that's based on your goals and tolerance for risk.

Thanks to the reader who mentioned this article in the comments.
Comments
Anonymous
Anonymous   |     |   Comment #1
The economy cycle is about every 6 to 6 1/2 years. That is every that often , a recession tends to occur. It translates into some time in 2007. There will NEVER be a rate increase during a recession!

Being in the stock market when it's at its peak now and a recession possibly coming soon is NOT a good idea at all!
Anonymous
Anonymous   |     |   Comment #2
Sorry unable to predict interest rates. Sure wish I could. Good rates are like porn - I know 'em when I see 'em - I know in my gut. Right now there is only ONE really good rate remaining, devilishly good: it is the 666 Loudoun three year. They just keep on dangling that sweet thing beyond reach. Has anyone out there, not strictly qualified, found a way to join Loudoun and cash in on this near giveaway? For those who do, take a bow; man, what a coups!
scottmatthew
scottmatthew (anonymous)   |     |   Comment #3
Remember, rates peak every 6 years. You will be ****ED if you lock your money in now for 2-3 years. When those come due, rates will stink (think 2003).
Now is the time to take 6+% on 5 year CDs, and move on. The fun is over until 2012.
scottmatthew
scottmatthew (anonymous)   |     |   Comment #4
Remember, rates peak every 6 years. You will be ****ED if you lock your money in now for 2-3 years. When those come due, rates will stink (think 2003).
Now is the time to take 6+% on 5 year CDs, and move on. The fun is over until 2012.
Anonymous
Anonymous   |     |   Comment #5
i wholeheartdly agree with locking in the near 6% rates now on long term CDs > 3 yrs

i believe all these high money market account rates are a clever ploy by the banks to cut risk and enrich themselves. rates are going to drop and they know it so diverting you from locking in higher CD rates now and making a little extra these upcoming months with higher MM rates is going to backfire for us consumers, especially if the rates are 2-3% by the end of next year.

it works well for the bank as they only need to make money on current rates so paying out now is fine while the fed rate stays high.

if your afraid of locking in a long term CD rate, don't be; you can break it if rates skyrocket sometime later. MM rates are not going to go up, only down, so any long term CD that beats current rates is a win-win no matter what if instant liquidity is not an issue.