About Ken Tumin

Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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Fed's New Interest Rate Forecasts May Be Bad News For Savers


Fed's New Interest Rate Forecasts May Be Bad News For Savers

The minutes from the Fed's December meeting were released on Tuesday, and they reveal plans for the Fed to publish forecasts showing when it may change the federal funds rate. As mentioned in this Reuters article, these forecasts may suggest "rates will be on hold for longer than previously expected." The next Fed meeting on January 24-25 will include the release of these new projections.

The Fed's current policy statements suggest that mid-2013 will be the earliest we'll see a rate hike. When the Fed first added the mid-2013 language to its policy statement in August, it proved effective in further driving down rates including deposit rates. So if we see new forecasts pushing out the date for the first increase of the federal funds rate, that will likely be bad news for savers.

I'll let the economists debate whether this new policy will be helpful for the economy. This Bloomberg article describes some of the potential problems. The reader me1004 made a good point why this new policy will likely just slow the recovery.

I think most readers of this blog would concur that the ultra-low interest rate policy has punished savers much more than helped the economy. There's no sign that this will change anytime soon. I'm afraid until we see significant improvements in the economy and employment, interest rates will stay low.

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Anonymous   |     |   Comment #1
Ken, you are so right.  These low interest rates have greatly hurt savers, but I can't see any evidence of how it has help the economy.
Shorebreak   |     |   Comment #2
The quarterly forecasts of interest rate trends that the Fed will issue are merely to help manipulate the markets. Buyers will be more likely to buy shares if they know rates won't change for the following quarter. Corporations plan on a quarterly basis so they will like it also. Don't forget, in this country, a quarter is called "long-term" planning. Meanwhile, countries like China plan decades ahead.
Anonymous   |     |   Comment #3
So what else is new?  As long as the Feds see that savers still have some money left in the banks, they will keep interest rates artificially low until they bleed us dry.  In the mean time inflation will hasten the process.

No disrespect to you, Ken.  I believe you provide us savers with an invaluable service. 
Anonymous   |     |   Comment #4
we need ron paul more than ever
scottj   |     |   Comment #5
Bernanke will do everything  possibly  to get Obama reelected and keeping rates low will make the markets/economy look better. A vote for Ron Paul will just help  Obama win and then he will reappointment   Bernanke  to another term. Romney the only one who can carry the middle and defeat Obama and I'm very sure would not keep Bernanke around. Maybe make Ron Paul fed Chief?
lou   |     |   Comment #6
Agree Scott, Paul can't win which would leave us with Obama for another 4 years. I am supporting Romney because he is the only one who can probably beat Obama at this point. I hate his Ma. health plan and not sure I totally trust him, but he is certainly better than what we have now. I hope Republicans don't nominate a fringe candidate, otherwise this country is going down the tubes.
Anonymous   |     |   Comment #7
Savers looking for tanking interest rates on savings to recover with a change in the White House administration need only look at the historical records throughout the Bush administration to dash any of those hopes.  After the Dot Com and EnRon cycle of financial disasters that triggered the equity market collapse lasting until 2003, the Fed cut interest rates drastically  until the housing market frenzy kicked in prior to 2008. The housing market may not recover for decades, so it is highly unlikely that the Fed will change their course of low interest rates, no matter who occupies the White House.  To be more objective, much of the problems that our country has faced financially occured during Bush's watch during the 2000's.  I don't think that we can expect any differently in 2012 should the Republicans retake the White House.  I wish there was a strong Republican candidate to challenge Obama, who could influence a change at the Fed Reserve.  I don't think any of the current Republican candidates have a realistic chance of winning, let alone the power to change the current direction of the economic climate.  The Federal government continues to operate at a deficit even with Republican control of the House. Reducing taxes for the rich and businesses is not going to create the revenue that is needed to pay for the uncontrolled Federal spending that prevails whether the Democrats or Republicans are in power. Artificially low interest rates are here to stay for a VERY LONG TIME. Uncontrolled inflation is the only threat to those low rates.
Anonymous   |     |   Comment #8
Agreed Anonymous #7 stated:

"...I don't think that we can expect any differently in 2012 should the Republicans retake the White House.
...Artificially low interest rates are here to stay for a VERY LONG TIME."

It's unimagable that FED will raise interest rates any time soon under either a Republican or Democrat President (lucky if in 10 years).

Because interest rates direct ties with Optional Adjustable-Rate Mortgage (and there are trillions involved) and it's impact on the housing market. So all it is is just a charade.
Anonymous   |     |   Comment #9
As far as interest rates go, I believe Anonymous #7 nailed it.


Vote for who ever you want.  That's what Democracy is all about.


Ron Paul will get my vote!


If he doesn't make it, at least I can say I tried to change things, but the majority of voters thought different and liked the course this country was taking.   

Apache   |     |   Comment #10
Ron Paul is a nice guy but have you paid attention to what he really wants to do about certain issues???  I think we will be in one great WAR before his presidency ends IF he gets in.  He is too much of a radical for my liking.  Anyone but Obama should be the call but make sure you KNOW what you are getting!
Anonymous   |     |   Comment #11
Hard to belive that #10 is really a Floridian!
Anonymous   |     |   Comment #12
Apachi, if your worried worried about a great WAR, then certainly you don't want to vote for Santorum to be our next president.  There isn't any good choices left.  
Anonymous   |     |   Comment #13
If you want to blame someone for the economy, you must blame the previous 8 years of the republican watch. Taking over after the Bush administration was like pouring water on a fire after the house has burned down!

 Now you can blame the Fed. What they are doing is forcing the consumer into high risk stock market investments by systematicaly destroying fixed income investments. Their answer to rebuilding the economy is to reinflate the stock market into the next bubble, again leaving investors with no choice but to gamble on their futures. The end result will be massive losses that will once again make retirement impossible for another generation of people. The system is broken and there is no fix. It's the biggest Ponzi scheme in existance!   
Apache   |     |   Comment #14
Where did you people get it that I am a "Floridian"??  I am not voting for Paul or Santorum?  I think the old guy who sells bananas with a monkey can do a better job for the US than any of our so called "candidates".  I especially love it when they say "with pride"  "I am NOT a politician"  Of course they aren't! They all prove they have no idea how to really be a "politician by their actions.  I really need to get the old guy with the money to run for President!
Grammarman   |     |   Comment #15
Never realized how similar money and monkey were before.
Anonymous   |     |   Comment #16
Yes, but who is the MASTER and who are the monkeys on the chain?
Jim Raynes
Jim Raynes   |     |   Comment #17
I am sorry to say that no one in their right mind should have their savings denominated in the US Federal Reserve Note dollar.  It is an inherently worthless currency that is the subject of the biggest Ponzi scheme in the history of the world.  It has been irredeemable paper trash ever since 1933, and is backed by nothing but the government's promise to pay back the same paper dollars as your account is denominated in.  What is not guaranteed by the FDIC or anyone else is the continued buying power of each unit.  Indeed, the US dollar has lost 98.7% of its purchasing power, in terms of gold, since the Federal Reserve was established in 1913, and opened its doors in 1914.

This is a great site if it is used solely as a means of finding the best places to transiently stash paper money.  However, no one in their right mind would buy CDs right now.  The western nations have built up the biggest credit boom in history, and it MUST be "delevered" or inflated away in America, Europe and Japan.  There is just no way out of it, during the coming decade.  We are going to either see debt defaults on a massive scale, resulting in the complete implosion of the pension and financial system, or massive money printing under the guise of quantitative easing.  Since implosion does not result in politicians getting reelected, we will see continued monetary debasement by the Fed, ECB, Bank of England and Bank of Japan.

The bottom line?  Things like platinum are going to soar upward in price, as real stock prices (after inflation) go into stagnation and bonds, CDs and cash holdings look like they are OK nominally, but, in real terms, implode.  Inflation is currently running at 11.2% per annum if calculated on the more honest formulas of 1980 (see, www.shadowstats.com).  It is going to get much worse.  Be smart.  Don't suffer financial repression from buying CDs.  Take advantage of the recent price crash in precious metals to pick them up relatively cheaply, especially platinum, but also gold and silver.  Put cash into liquid accounts ONLY, and use it to buy at times like this.  It is the only way your assets will survive intact, over the coming decade.