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Fed Holds Steady Again - Effects to Your Savings Account and CD Strategies?


As expected, the Fed held steady yet again. The target for the federal funds rates remains at 5.25%. It's the ninth consecutive time they've held steady (see CNN article). The Fed mentioned that inflation is the main concern, so we may not see a rate cut this year. The recent subprime problems don't seem to be a major concern for the Fed. Some readers have expressed opinions that the subprime problems will end up having major effects in the economy. If that happens, it would seem likely that the Fed would start to cut interest rates, but as the article mentioned, it may not be able to.

So with rates holding steady and with CD yields still not much better than savings account yields, there seems to be no reason to rush into CDs unless you can get some nice rates. Many savers may be able to make it through most of 2007 with their money in 6% savings accounts thanks to promos at EverBank, HSBC Direct, FNBO Direct and now UmbrellaBank. But remember, those 6.25% Penfed CDs or those 6.25% JFCU CDs that were available earlier this year are still earning more.

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