Federal Reserve, the Economy and CD Rate Forecast - Feb 12, 2019

There were more signs in the last week that the Fed won’t be raising rates anytime soon. In recent speeches, Fed Chair Jerome Powell and other Fed officials have suggested that the Fed will be exercising patience in the first half of this year. As economist Tim Duy described in his latest Fed Watch blog post:
the Fed is sending a very coordinated message that they are on hold through the first half of the year. Now that policy rates are near the estimates of neutral while inflation remains unexpectedly low, central bankers are content to slow down and review their handiwork.
The best chance we have for a rate hike in the second half of this year is if the economic data surprises on the upside. In the speeches, the Fed officials have been optimistic about the economy. If we keep seeing strong economic growth this year and if that results in higher inflation, we may have a decent chance for at least one Fed rate hike in the second half of 2019.
On Wednesday morning, the Consumer Price Index (CPI) for January will be released. The consensus is for a 0.2% increase in the core CPI. Keep an eye on CPI releases this year to see how inflation evolves. Higher inflation will increase the odds of a Fed rate hike.
The odds of any 2019 Fed rate hikes as indicated by the Fed Fund futures are now close to zero. They now show odds of less than 2% of a rate hike by December. The odds that the rate will be lower by December are now 11.6%. In summary, the market definitely believes that we’re at the top of the rate cycle.
If we are at the peak in this rate cycle, that would be very disappointing. The target range of the federal funds rate is now 2.25% to 2.50%. The top of that range is still less than half of what the federal funds rate was from June 2006 to September 2007, the peak of the last rate cycle.
Short-dated Treasury yields (maturities under one year) were up from last week while other Treasury yields (maturities of one year and over) were down. The 10-year yield had the largest decline, falling six bps in the last week. The 10-year yield has declined 15 bps in the last year.
The 10-2 spread (the difference between the yields of the 10-year and 2-year Treasury notes) narrowed slightly, falling from 18 bps to 17 bps. A negative 10-2 spread has a history of preceding recessions.
The following numbers are based on Daily Treasury Yield Curve Rates and the CME Group FedWatch.
Treasury Yields (Close of 2/11/19):
- 1-month: 2.44% up from 2.39% last week (1.35% a year ago)
- 6-month: 2.51% up from 2.50% last week (1.82% a year ago)
- 1-year: 2.55% down from 2.56% last week (1.93% a year ago)
- 2--year: 2.48% down from 2.53% last week (2.09% a year ago)
- 5--year: 2.47% down from 2.51% last week (2.56% a year ago)
- 10-year: 2.65% down from 2.71% last week (2.86% a year ago)
- 30-year: 3.00% down from 3.03% last week (3.14% a year ago)
Fed funds futures' probabilities of future rate hikes by:
- Mar 2019 - up by at least 25 bps: 0.0% same as last week
- Jun 2019 - up by at least 25 bps: 0.0% down from 4.9% last week
- Sep 2019 - up by at least 25 bps: 2.0% down from 6.0% last week
- Dec 2019 - up by at least 25 bps: 1.8% down from 5.3% last week
- Dec 2019 - down by at least 25 bps: 11.6% up from 9.4% last week
CD Interest Rate Forecasts
With long-dated Treasury yields declining and with the odds of any 2019 Fed rate hike low, banks will have reasons to end CD rate hikes, especially on long-term CDs. In the last couple of months, we have been seeing a steady fall of brokered CD rates. I’ll have more on this in my CD summary later today. Rate trends are often seen first in brokered CDs before they’re seen in direct CDs.
Short-term CD rates will likely hold pretty steady until the odds of a Fed rate hike or cut grows. Long-term CD rates may have downward pressure for some time until we see strong economic data that increases the odds of a Fed rate hike.
If the economic data weakens and the Fed starts to suggest the possibility of rate cuts, we may then see widespread rate cuts on CDs.
The above graph shows the rate trends of the average CD rates. These average rates are based on all the rate data that we have collected over the years. This is an interactive graph. You can choose the term of the CDs (from 3 months to 5 years) and the look-back period (from 3 months to 5 years). As you can see in the graph, average CD rates for all terms have increased in the last year with the largest gains occurring after March 2018.
Note: This Fed and economic overview used to be part of my weekly summary, but it will now be a separate post. My weekly summaries will now be focused entirely on deposit rates and deals, and they will be published on Tuesday evenings.
According to Ken's commentary, the future for a Fed hike looks pretty bleak. I'm going to lock up one more five-year CD, and call it a day. Not much more to do, or can do. Well, I guess I can play around with some short-term stuff, a couple of 6 month CDs coming out of the oven soon. But I don't think I will reinvest those, I'm planning to take a nice long relaxing trip somewhere and have some fun with that money. Life is too short to hoard it all.
HighYield has the right idea. There is more to life than just accumulating money.
I blow all the monthly interest that comes back to me via ACH every month, and enjoy it. :-)))
(Hearing that, some of you guys probably break out in HIVES! LOL!!!!)
Perhaps if you didn't jump at retiring so young and worked a few more years, you wouldn't be so stressed out earning a low interest rate on your money.
By-the-way, you know nothing about "these guys". Some of us worked mighty hard and long hours as blue collar workers out in all kinds of weather conditions, not office jobs. It may be that we worked many more years than you, saved more, and now in retirement, have much better and enjoyable things to do in life than constantly looking for ways to maximize our returns on our next eggs.
I've changed my tune... I'm now very thankful to get the 2.40% to 3.55% or so, in my savings & ladder. It's the only game in town for a conservative saver like me, so I'll just shut up, and take it!
My monthly profit from this is $170/month. Where else am I going to make that per hour? Plus, I enjoy it.
Now, if only I could avoid that stress....
FED (Federal Reserve bank) is NOT a Federal part of any US government, they are no reserve of anything, because they do not have any money to lend but have ability to create free to them money without any costs or assets pledged and last, they are not INDEPENDENT body, they are controlled by the globalists and the bank of England.
Trump suspended their mandate temporary and silently without any notice to anyone in the media, because, (to make the long story short) their mandate was and still is, to destroy the US dollar and the US economy by order from the globalists.
You do not have to believe nor pay any attention to this post, but the fact remains FACT. The $22 trillions of national debt, creates self imploding economy and destruction of everyones wealth, again you do not have to agree or believe, but that is the FACT.
Trump is fighting for us to save us from the inevitable and the interest rates must be low for his strategy to work, I say give him some credit and time to save us from the bad future that the previous administration(s) did set it up and the deep state, they conspired against the Americans.
The 2-3% interest should be our last thing on our minds, if we can save the present value of our assets, consider us lucky.
https://www.marketwatch.com/story/bill-gates-tax-plans-like-ocasio-cortezs-are-extreme-and-missing-the-picture-2019-02-12
Some "total confiscation of the people's wealth", Joe.
https://www.youtube.com/watch?v=dK60sX_upB4
Do you know that every member in congress receives a percentage of the pentagon's budget every year as a tax free bonus?
https://www.wsj.com/articles/a-connecticut-rescue-plan-1540509346
https://www.wsj.com/articles/connecticut-nations-wealthiest-state-may-be-tapped-out-on-taxing-the-rich-1495186203
And if your don't think many of the super-rich will also leave the entire COUNTRY if attacked with confiscatory taxes - guess again.
https://www.drovers.com/article/democrats-green-new-deal-wants-eliminate-farting-cows
Upon hearing this, "Bessie" out here in the South 40 understandably got very nervous, stopped giving milk, and became even more gassy. So - another example of the "law of unintended consequences" by the Dems.?
1. Our now 22 trillion in debt
2. The world economy slowing
3. Trump complaining about interest rates
4. The stock market throwing a tantrum after the last rate hike
All these things have now combined causing him adopt a wait and see attitude. The best chance we have for more rate hikes this year is a uptick in inflation which is very possible because the economy is strong. So am I panicking and locking up long term CD's at low rates under 4%? No because there are much better rates to be had with short term CD's, bank bonuses, dividend paying stocks etc.
If you bought precious metals, the transactions are already associated with your SS#, nobody can hide anything anymore.
http://politicalticker.blogs.cnn.com/2009/02/13/dems-target-right-wing-talk-radio/
https://www.youtube.com/watch?v=dK60sX_upB4
Without knowing your age, retirement income, expenses and investment position it's very difficult to answer your question. Generalized responses are prone to error and free advice is often worth exactly what you paid for it...nothing.
This almost certainly has nothing to do with Trump. By now Trump knows he can't fire Powell - he's said so. I think Powell realizes on his own that while it's not the responsibility of the Fed to "fix" the stock market, the US market indices do provide a valid leading indicator regarding where the economy might be going, and deserve to have some attention paid to them by the Fed for that reason.
I nearly always support Trump and conservatives, but this idea that the Fed is "running scared" about being "dismantled" is like something out of either the Trilateral Commission of old, or the Twilight Zone - take your pick.
http://endoftheamericandream.com/archives/rats-public-defecation-and-open-drug-use-our-major-western-cities-are-becoming-uninhabitable-hellholes
Interestingly, all our 3.3% brokered CD's are presently worth more than par on the open market. The 3.3% CD's were originally 10-yr and are now about 4.5 years away from maturity.
I check everyday and the brokered CD trend is down. The trend is slowing a bit and may find a base soon enough.
"This planet Can't sustain people eating meat",....."we have to re-educate them or do way with the meat industry"
$9.15 billion for international security assistance
$1.9 billion for foreign food and hunger programs
$3.1 billion for global health programs
$3 billion for international development assistance
$3.7 billion to support the economies of foreign countries
$4.4 billion for international disaster assistance
$3.8 billion for assistance for foreign refugees
And only $1.2 billions for the wall. Trump has no choice but to declare state of emergency.
Trump will be the last great President and it will be several generations before he receives the recognition he deserves.