Best Bank Account Interest Rates - Summary for October 17, 2017

Last Friday’s consumer inflation report that showed a surge in inflation is unlikely to have any impact on the Fed. Higher energy prices due to Hurricane Harvey was the main reason for the surge in the consumer price index (CPI), but the core CPI which excludes food and energy rose a much smaller amount (0.1%), and on a yearly basis, the core CPI remains unchanged at 1.7% for the fifth month in a row. Even though core CPI isn’t the preferred inflation index for the Fed, it does add to the evidence that low inflation won’t be going away anytime soon. On Sunday, Fed Chair Janet Yellen gave a speech on the U.S economy and monetary policy, and in that speech, she reviewed the concerns about inflation:

To be sure, our understanding of the forces that drive inflation is imperfect, and we recognize that this year's low inflation could reflect something more persistent than is reflected in our baseline projections.

The good news for us savers hoping for more rate hikes is that Fed Chair Yellen still thinks that the low inflation will only be temporary.

My best guess is that these soft readings will not persist, and with the ongoing strengthening of labor markets, I expect inflation to move higher next year.

As economist Tim Duy described in his Fed Watch newsletter, “[t]he Federal Reserve remains committed to a December rate hike, persistent low inflation not withstanding.” That may change in 2018 if low inflation is seen as a more persistent condition. That’s where new Fed members could have an impact. Fed Chair Yellen’s term ends in February, and if she is replaced with an inflation hawk, that may increase the chance that we’ll see more Fed rate hikes in 2018. According to Bloomberg, President Trump is planning to choose the next Fed Chair before his Asian trip that is scheduled to begin on November 3, 2017.

The odds of a December Fed rate hike based on the Fed funds futures continue to be very high, and they have gone up slightly from last week from 90.6% to 93.1%.

Treasury yield changes from last week were mixed. The 2-year and 5-year yields went up slightly while the long-dated yields fell. The 30-year bond yield had the largest change, falling 8 bps.

The following numbers are based on Daily Treasury Yield Curve Rates and the CME Group FedWatch.

Treasury Yields:

• 1-month: 0.99% down from 1.03% last week (0.52% on Jan 3)
• 6-month: 1.25% down from 1.26% last week (0.65% on Jan 3)
• 2--year: 1.54% up from 1.51% last week (1.22% on Jan 3)
• 5--year: 1.97% up from 1.95% last week (1.94% on Jan 3)
• 10-year: 2.30% down from 2.35% last week (2.45% on Jan 3)
• 30-year: 2.80% down from 2.88% last week (3.04% on Jan 3)

Fed funds futures' probabilities of future rate hikes by:

• Dec 2017 - up by at least 25bps: 93.1% up from 90.6% last week
• Dec 2017 - up by at least 50bps: 1.4% same as last week
• Jun 2018 - up by at least 25bps: 97.7% up from 96.3% last week
• Jun 2018 - up by at least 50bps: 64.0% up from 57.6% last week

Savings and Checking Account Rates

The expectation that another Fed rate hike is coming continues to be encouraging internet banks into hiking their savings and money market rates. And when internet banks start hiking rates, competition seems to keep the hikes coming. In the last two weeks, three big internet banks increased rates on their savings and money market accounts.

Two of the big internet banks increased their savings account rates to 1.30% APY. First, Barclays increased its savings account by 10 bps to 1.30% APY, and GS Bank followed with the same rate hike.

Discover Bank increased both its savings account and money market rates. However, Discover isn’t keeping up with the banks like Barclays and GS Bank. Discover raised its savings account by 5 bps to 1.20% APY, and it raised its money market account rate by 5 bps to 1.10% APY for balances of at least $100k.

Three other banks increased their rates, but their new rates are far from the rate leaders. One noteworthy bank is Capital One which raised the top-tier rate of its 360 Checking by 10 bps to 1.00% APY. This top-tier requires a $100k minimum balance.

CIT Bank didn’t have a recent rate increase, but it did increase the maximum balance that qualifies for its top yield of 1.35%. Its savings account now earns 1.35% APY for balances up to $250k. If the balance exceeds $250k, the entire balance now earns 1.30% APY. This tier used to be $100k.

Incredible Bank did the opposite of CIT Bank. If your balance exceeds $250k, you’ll get the top rate, and that is now 1.41% APY. Balances under $250k and above $2.5k continue to earn 1.21% APY.

Due to Incredible Bank’s rate change, we now have six banks in the 1.40% club. This “club” is the group of banks and credit unions offering nationally-available savings and money market accounts with non-promo rates of at least 1.40% APY. In addition to Incredible Bank’s savings account, the group includes State Bank of Texas Jumbo Money Market (1.55% APY), UFB Direct Money Market Savings (1.41% APY), DollarSavingsDirect Savings (1.40% APY), Live Oak Bank Savings (1.40% APY) and Popular Direct Plus Savings (1.40% APY). I’m excluding the Mega Money Market accounts from All America Bank and Redneck Bank since these have $35k balance caps.

Reward Checking Accounts

Again, there were no changes to my list of nationally available reward checking accounts. Reward checking rates have been slower to respond to the Fed rate hikes as compared to internet savings account rates. Since much of the rates of reward checking accounts are paid for by debit card activity, banks may continue to go slow with rate hikes.

To find the highest reward checking rates and balance caps in your state or nationwide, please refer to our reward checking rate table. If you're new to reward checking, please refer to my blog post, Overview of Reward Checking and Our Reward Checking Table.

Certificate of Deposit Rates

I’m now publishing my CD survey as a separate post. Please refer to my survey of the best CD rates. This recap will focus on banking news of the week and liquid accounts.

CD Deals: I just wanted to include this reminder of a few noteworthy CD deals that are available.

The hottest nationally-available CD deal is currently at GTE Financial Credit Union. Five special CDs are available with terms from 6 months to 30 months. The special 30-month Jumbo CD earns 2.78% APY, and the non-Jumbo earns 2.53% APY. These even have an add-on deposit option. Please refer to this blog post and the 200+ comments under the blog post for more details.

Checking/Savings/Money Market Accounts:

• Best Savings Account Rates (Nationwide and by State)
• Best Money Market Rates (Nationwide and by State)
• Best Checking Account Rates (Nationwide and by State)

• Noteworthy Accounts Available Nationwide:

Reward Checking Accounts:

• Best Reward Checking Account Rates

• Noteworthy Accounts Available Nationwide:

Certificates of Deposit:

• Best CD Rates (Nationwide and by State)
• Best IRA CD Rates (Nationwide and by State)
• Survey of the Best CD Rates (Nationwide and Local)

Bank Account Alternatives - NOT FDIC Insured

• Investment Discussion Forum

• Series I Savings Bond Purchases from May 2017 through October 2017