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Savings Account Rates Decline, More Hints of Rate Cuts by the Fed


The Fed released its minutes yesterday from their October 28/29 meeting, and as this USA Today article describes, there are hints of future rate cuts. The economic downturn appears to be growing worse. One analyst interviewed predicted the Fed would cut the rate by 50 basis points at its December meeting. BestCashCow has a good discussion on the future direct of the Fed Funds rate. But the cut may not be that important. As this MarketWatch commentary explains, the real overnight rate shows there's nothing left to cut. "The actual rate at which overnight funds are changing hands these days is only 1/4%, far below the Federal Reserve's intended rate of 1%." So monetary policy has gone about as far as it can go to help the downturn.

Even though banks have been desperate for deposits (see post), the economic conditions seem to point to falling savings account and CD rates. Some examples this week:
  • CNBBankDirect savings account - 3.75% APY (was 4.00%)
  • Capital One/Costco savings account - 3.50% APY (was 3.66%)
  • Capital One savings account - 3.40% APY (was 3.55%)
  • Citibank Ultimate Savings Account - 3.00% APY (was 3.15%)
  • Corus Bank's 12-mo & 6-mo CDs - 4.00% APY & 3.75% APY (was 4.25% & 4.00%)
For links to these banks and my account reviews, please refer to my weekly rate summary.

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Anonymous   |     |   Comment #1
We should always keep in mind that it is the interest rate relative to inflation that is important. If there is no inflation, then we are keeping up with inflation even if we earn nothing.
Anonymous   |     |   Comment #2
I have a CNBBank account and contacted them by e-mail today to make sure my 4.00% that was guaranteed was still good and they confirmed that it was. I opened my account on 09/24/08 and is good until 03/24/09. They did not advise when the 4.00% guarantee ended.
Anonymous   |     |   Comment #3
I JUST opened a savings account with CNB to get that nice 4%. I transferred money in from my savings account at Alliant Credit Union (3.75%): that'll teach me! I've just transferred the money right back to Alliant tonight; I'm so mad! Even though they're both 3.75 right now, I don't feel any loyalty to CNB! (I'm keeping a small amount there, just in case).