Fed Meeting: the Pause Returns - Review of Impact to Savers


The Fed decided today to hold rates steady. The target range of the federal funds rate remains at 1.50% to 1.75%. The following is an excerpt of today’s FOMC statement with the all important rate description:

The Committee decided to maintain the target range for the federal funds rate at 1-1/2 to 1-3/4 percent. The Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective.

All of the FOMC voting members voted for today’s policy action. Unlike the last four meetings, no one dissented.

Summary of Economic Projections

In addition to the statement, the Fed released an updated summary of economic projections (SEP). In the first table of this summary, you can see the Fed’s economic projections for future years and how they compare to the Fed’s September projections. There were no changes in the GDP projections. For the unemployment rate, there were slight reductions in future rates. For PCE inflation, the only change was the projected 2019 core PCE inflation. In September, core PCE inflation for the end of 2019 was projected to be 1.8%. Now it’s projected to be 1.6%. This strengthens the case that it’s not necessary to hike rates.

Fed’s Dot Plot

At the bottom of this first table in the SEP, the forecast most interesting to savers is the projected federal funds rate. The median projected federal funds rate for 2020 shows no change. Further details of this can be seen in the dot plot at the bottom of the SEP. Out of the 17 FOMC participants, 13 of them are projecting no change in the federal funds rate in 2020. The other 4 are projecting a 25-bp rate hike. More participants project higher rates in 2021 and 2022. No one is projecting a rate cut in future years. For 2022, only one participant is projecting a rate that will remain at its current level. All other participants are projecting rates that are higher from its current level by a range of 25 to 125 bps.

The good news from the dot plot is that no one on the Fed thinks there will be rate cuts in the next three years. Many on the Fed think there will be rate hikes in the next three years. Based on the dot plot history, I wouldn’t take the dot plot too seriously. For example, the dot plot from December 2018 showed that no one on the Fed projected rate cuts in 2019.

Press Conference

At the press conference today, many questions came up about inflation and its impact on rate decisions. This gave Fed Chair Jerome Powell the opportunity to reiterate his view about what he’ll need to see in inflation before deciding to raise rates. With an answer that was very similar to one in October, he said that it’s his view that it would take a “significant move up in inflation that’s also persistent before raising rates to address inflation concerns.” This supports the low odds of a rate hike in 2020.

Based on the SEP and the inflation projections, it would appear the odds of a rate hike will also be low for 2021 and 2022. One reporter asked about this inconsistency of the dot plot suggesting rate hikes in 2021 and 2022 while the inflation projections show inflation rates never exceeding 2.0% in those years. Here’s an excerpt of Fed Chair Jerome Powell’s answer of this question:

None of us have much of a sense of what the economy will be like in 2021. So I think what may be behind some of that is just the thought that over time it would be appropriate if you believe that the neutral rate is 2.5%, it would be appropriate for your rates to move up in that direction.

This is another example of why we should be skeptical of the dot plot.

Future FOMC Meetings

The next three FOMC meetings are scheduled for January 28-29, March 17-18, and April 28-29. The March meetings will include the summary of economic projections. All meetings now include a press conference by the Fed Chair.

What Savers Should Expect in 2020

Based on Fed Chair Jerome Powell’s comments about inflation, we may be starting a long period in which the Fed holds rates steady. Based on the recent history of inflation, it’s doubtful things will change anytime soon to meet the Fed Chair’s informal criteria for rate hikes.

Online Savings Account Rates

Online savings account rates have remained near the target range of the federal funds rate. As the federal funds rate has moved down, online savings account rates have generally followed with some lag. The good news for savers is that the online savings account rates have generally not fallen as much as the federal funds rate. Here are a few examples from the popular online banks. All percentages are APYs, which are accurate as of 6:00pm 12/11/2019:

  • American Express High Yield Savings: Peaked @ 2.10%, Now @ 1.75% (-35 bps)
  • Synchrony High Yield Savings: Peaked @ 2.25%, Now @ 1.80% (-45 bps)
  • Goldman Sachs Bank Online Savings: Peaked @ 2.25%, Now @ 1.70% (-55 bps)
  • Ally Online Savings: Peaked @ 2.20%, Now @ 1.70% (-50 bps)
  • PurePoint Financial Online Savings: Peaked @ 2.35%, Now @ 1.80% (-55 bps)

I think we may see a few more online savings account rate cuts in December and January, but rate cuts should now slow down with the Fed holding rates steady. With the target federal funds rate range now at 1.50% to 1.75%, I’m afraid we should expect most online savings account rates to move near this range.

CD Rates

As we have seen in 2019, CD rates can fall even when the Fed is holding rates steady. One thing that tends to lead CD rate changes is changes in Treasury yields, and Treasury yields have been on the decline since November 2018. I’ve listed the yields of the 10-year and 5-year Treasury notes that occurred after the last ten Fed meetings. Most of the declines occurred before the Fed decided to start cutting the federal funds rate. The yields since September appear to be stabilizing.

  • Nov 8, 2018: 10yr @ 3.24%, 5yr @ 3.09%
  • Dec 19, 2018: 10yr @ 2.77%, 5yr @ 2.62%
  • Jan 30, 2019: 10yr @ 2.70%, 5yr @ 2.49%
  • Mar 20, 2019: 10yr @ 2.54%, 5yr @ 2.34%
  • May 1, 2019: 10yr @ 2.52%, 5yr @ 2.31%
  • Jun 19, 2019: 10yr @ 2.03%, 5yr @1.77%
  • Jul 31, 2019: 10yr @ 2.02%, 5yr @ 1.84%
  • Sep 18, 2019: 10yr @ 1.80%, 5yr @ 1.68%
  • Oct 30, 2019: 10yr @ 1.78%, 5yr @ 1.61%
  • Dec 11, 2019: 10yr @ 1.79%, 5yr @ 1.64%

Brokered CD rates are the first deposit products that respond to Treasury yield changes. Like the Treasury yields, brokered CD rates have plummeted since November 2018. The top 5-year brokered CD rate was 3.60% in November 2018. As of last week, it’s down to 1.95%. That’s a fall of 165 bps. On the positive side, this is up from the last meeting when the top 5-year brokered CD rate was 1.90%. It’s also up from the September meeting when the top 5-year rate was 1.70%.

Direct CD rates from online banks and credit unions haven’t fallen as much as Treasury yields and brokered CD rates. Here are a few examples of how 5-year CD rates have fallen at five popular online banks. All percentages are APYs, which are accurate as of 6:00pm 12/11/2019:

  • American Express 5yr CD: Peaked @ 3.10%, Now @ 2.15% (-95 bps)
  • Synchrony 5yr CD: Peaked @ 3.10%, Now @ 2.25% (-85 bps)
  • Goldman Sachs Bank 5yr CD: Peaked @ 3.10%, Now @ 2.15% (-95 bps)
  • Ally Bank 5yr CD: Peaked @ 3.10%, Now @ 2.15% (-95 bps)
  • PurePoint Financial 5yr CD: Peaked @ 3.10%, Now @ 2.05% (-105 bps)

A few of these CD rates are down only slightly from October. That may be a sign that we are at or near a bottom for CD rates.

Deposit Account Strategies

Without the possibility of Fed rate hikes anytime soon, deposit rates will likely be pretty stable in 2020, and it may take multiple years before we see substantially higher rates on savings accounts and CDs. The Fed’s dot plot may be the best case scenario for savers. In that scenario, we see a Fed rate hike of 25 bps in both 2021 and 2022. The economy would probably have to be very strong for such rate hikes. That would put upward pressure on CD rates before the first Fed rate hike. Once the Fed increases rates, online savings account rates would slowly follow.

The other scenario is that there will be an economic slowdown next year. Even if there’s no recession, a slowdown may cause the Fed to cut rates a few more times. Even if it’s not severe enough to cause more Fed rate cuts, it would probably keep inflation muted, and that would cause the Fed to hold rates steady for a long period of time. In any of these pessimistic cases, deposit rates either hold steady or decline.

In this type of rate environment, it seems doubtful that we’ll see any widespread CD rate increases in the next one or two years. Thus, mid-term and long-term CDs make sense now. If you’re optimistic about the economy, choose mid-term CDs. If you’re pessimistic, choose long-term CDs. If you had suspended your CD ladders by not re-investing maturing CDs into new long-term CDs, it’s time to continue with your CD ladders by investing those funds back in long-term CDs.

Mid-Term and Long-Term CDs with Small Early Withdrawal Penalties

If you are worried about locking money into CDs, look for CDs with early withdrawal penalties (EWP) of no more than six months of interest. The best deals are currently from credit unions that are still offering CDs with yields close to 3% and with EWPs of only six months of interest. Two examples as of 12/11/2019 include Justice FCU (5-year Jumbo CD with a 3.21% APY) and Dover Federal Credit Union (5-year Jumbo CD with a 2.90% APY). Both of these credit unions make it possible for people in any state to join via an association membership. There’s also the 3.00% APY 37-month IRA Certificate Special from Navy Federal Credit Union. Unfortunately, there’s no non-IRA equivalent of this Special.

To see how the EWP affects the yield when you close a CD early, please refer to our CD Early Withdrawal Penalty Calculator.

Add-On CDs

If you have CDs that won’t be maturing until later this year or next year, consider add-on CDs with long terms. Open the add-on CD now and you will lock in today’s CD rate until the CD matures. If rates fall by the time your current CDs mature, you can fall back on that add-on CD by making additional deposits into the add-on CD. Those additional funds will then begin earning that same CD rate that was set when the add-on CD was opened.

Add-on CDs haven’t always worked as advertised. There have been a few credit unions that didn’t fully honor the add-on feature of their add-on CDs. GTE Financial almost did this in October, and there remains the possibility it could still do this sometime in the future. If interest rates fall more than expected and the institution didn’t specify a maximum balance level, the risk increases that the institution may renege on its add-on deposit promise.

One add-on deposit 5-year CD that’s nationally available is the 5-year Growth Certificates at Mountain America Credit Union (MACU). Unfortunately, the rate has fallen to 2.40% APY as of 12/11/19. In late 2018, this rate had been as high as 3.51% APY. There’s only a $5 minimum initial deposit. The main downside to this add-on CD is a maximum balance of $100k (in any one or combination of Growth Certificate accounts). MACU allows members to add money to their Growth Certificates at anytime. The account also requires an automated monthly deposit of at least $10. The $100k maximum is a downside, but I think it increases the odds that you’ll be able to add deposits all the way to maturity.

A couple of online banks have add-on CDs, but they’re shorter-term CDs.

The new internet bank, Rising Bank, offers two add-on CDs. These are called Rising CDs, and they have terms of 18 months and 3 years. For add-on CDs, the longer term ones are best for hedging bets on interest rates. The 3-year Rising CD has a 2.10% APY as of 12/11/2019 (Rate had been 3% in March). Unfortunately, it has a high minimum deposit requirement of $25k. There’s a maximum balance of $500k, which is an important limitation to note. Another important limitation is that you are allowed to make no more than two additional deposits during the term of the 3-year Rising CD, and each deposit must be a minimum of $5k.

The 3-year Rising CD also provides two options to increase the rate if the 3-year Rising CD rate should happen to rise. I don’t consider that an important feature, especially in our current environment. It’s not clear in the CD disclosure, but I’ve been told by a Rising Bank official that this rising rate feature is completely independent from the add-on feature. In other words, you can exercise the add-on option without the interest-rate option. So if the CD rate falls, you don’t have to worry about your CD rate falling when you make the add-on deposit.

The online bank Bank5 Connect has been offering a 2-year add-on CD since 2013. The Bank calls it the 24-month Investment CD, and it has a 2.10% APY as of 12/11/2019 (Rate had been 60 bps higher in July.) According to the Bank5 Connect’s account disclosure for the Investment CD, “You may make an unlimited number of deposits into your account.” Minimum deposit is only $500.

No-Penalty CDs

With rates likely to fall, the no-penalty CD is a good way to avoid short-term rate reductions while maintaining liquidity. Unlike a regular CD, there’s no early withdrawal penalty. So there’s no lock on your money except for the first six days from account funding.

In the last year, no-penalty CDs have been introduced at a few online banks and credit unions. Below is a list of noteworthy no-penalty CDs with their APYs as of 12/11/2019.

  • 2.00% APY 11-month Flex Time Deposit ($100k min) - M.Y. eBanc
  • 1.90% APY 11-month Flex Time Deposit ($10k min) - M.Y. eBanc
  • 1.90% APY 13-month No-Penalty CD ($10k min) - PurePoint Financial
  • 1.90% APY 11-month No Penalty CD ($25k min) - Ally Bank
  • 1.90% APY 7-month No-Penalty CD ($500 min) - Goldman Sachs Bank USA
  • 1.85% APY 11-month Liquid CD ($5k min) - Citizens Access
  • 1.80% APY 11-month No-Penalty CD ($1k min) - CIT Bank
  • 1.80% APY 6-month No-Penalty CD ($500 min) - Investors eAccess
  • 1.75% APY 14-month No-Penalty CD ($10k min) - PurePoint Financial
  • 1.73% APY 11-month No Penalty CD ($5k min) - Colorado Fed Savings Bank
  • 1.70% APY 11-month No-Penalty CD ($500 min) - Goldman Sachs Bank USA
  • 1.70% APY 11-month No Penalty CD ($5k min) - Ally Bank
  • 1.65% APY 13-month No-Penalty CD ($500 min) - Goldman Sachs Bank USA
  • 1.65% APY 11-month No Penalty CD (no min) - Ally Bank
  • 1.65% APY 11-month No-Penalty CD ($10k min) - PurePoint Financial

When comparing these types of no-penalty CDs, longer terms are an advantage. The only reason to go for a shorter term is if the rate is higher.

Uncertainty of Future Rates

I don’t see much chance that rates will rise in the next year. Fed Chair Jerome Powell has again expressed his view that it would take a “significant move up in inflation that’s also persistent before raising rates.” That appears very unlikely for 2020. Thus, don’t expect online savings account rates to rise in 2020.

It’s possible that we could see some CD rate increases if the economy remains strong. As we saw earlier this year, the state of the economy can drive CD rates even when the Fed is holding rates steady. However, most of the CD rate cuts occurred after it became apparent that the Fed was going to cut rates. CD rate cuts continued as the Fed lowered rates. So until it becomes apparent that the Fed is going to hike rates, we probably won’t see widespread CD rate increases.

It’s important to remember that no one, including me, can predict future interest rates. Last year was a reminder of this when it appeared we might be seeing 4% savings account rates in 2019.

william   |     |   Comment #1
lowest unemployment in history, stock mkt at new highs,economy booming ,and inr rates aimost at zero ,why trump has high loan balances at his business and scared the FED to death
Anonymous   |     |   Comment #85
The economy is not booming. Real wages are up very slightly year over year. Farmers in the Midwest are suffering because of the tariffs; the large farms were given a bailout, but the average size farms are going broke. Manufacturing numbers are stagnant. Student debt is spiraling. Health care costs are going up, with no panacea in sight. The deficit is ballooning. "The economy is booming" is something said by those who have immense wealth, and got a gigantic tax cut. If I thought it was booming, I would say so, but it is not the '90's or the early '60's.
Predatory Depositor
Predatory Depositor   |     |   Comment #86
The United States economy is the envy of the WORLD!

It is common sense and not complicated.
DCGuy   |     |   Comment #2
With the online bank rates now descending to close to where my Government MMF rate is offering, I will stay with the state income tax exempt account for now since the Fed will keep rates steady. Better to take the deduction off the state income tax return than to have it fully taxable.
Predatory Depositor
Predatory Depositor   |     |   Comment #7
That strategy is unlikely to produce a higher after tax return. Assume you are in the highest state income tax bracket in the country as a resident of the People's Republic of California. Even if you are paying that highest rate in the country for your state income taxes that deduction is only worth 0.266%. So if there's a fully taxable option that pays more than 0.266% (which is about a quarter of 1%) more than the state income tax exempt option -- which there likely is -- you will end up with more money with the fully taxable option even after paying the taxes.

Of course if you are in a lower tax bracket than that the advantage of the tax exempt option is even smaller.
Bozo   |     |   Comment #3
I suspect diversification of one's asset mix will be the key going forward, as it was in 2019. Savers who limited themselves to deposit accounts alone missed out on a serious bull stock market in 2019. I, for one, prefer the yields on CDs to bond funds, so I keep the lion's share of our fixed income in both after-tax and IRA CDs. But my overall asset allocation, even at age 72, is roughly 40% equities/60% fixed income.

That said, past performance is not necessarily indicative of future gains or losses. A really good year can be followed by a really flat or down year in Mr. Market. History has shown that, over long periods of time, the stock market has well exceeded both bonds and CDs.

I personally prefer a "bucket strategy:, as I've noted in other threads. Keep enough in my cash bucket (CDs and liquid stash) to cover expenses for the next fifteen years or so. Let my stocks and bonds ride, subject only to RMD withdrawals.
Predatory Depositor
Predatory Depositor   |     |   Comment #4
The Fed did exactly what was expected of them today. Keeping inflation in check is their focus and with the stock market not crashing its smooth sailing for awhile. 2020 is an election year and the market should continue to do well if past performance is any indication of an election year.
Milty   |     |   Comment #5
Regardless of the Fed's rationale, I still no reason for the Fed to have reduced rates by 75 bps in 2019, except to bolster a sketchy stock market. Nor do I see where the Fed's mandate is to benchmark rates based mainly on some mythical 2% inflation rate. That being said, I understand folks are happy with their recent stock statements, especially versus a year ago, but this site is about deposit accounts not brokerage.
Inflation > 2%
Inflation > 2%   |     |   Comment #6
Milty I agree the CPI came out at 2.3% today core and yet the Fed is still trying to press inflation higher as seen in the press conference. The goal posts continue to change. Inflation is nothing more than a tax on us all and serves to erode our standard of living/savings every time they seek to press for higher and higher levels. Ironic that Powell was praising Volcker (who was known for fighting out of control inflation) at the beginning of the conference but yet he is doing the opposite in terms of facilitating higher and higher levels of inflation.

You can see how bad inflation has gotten in many various sectors year over year in the link below:
GreenDream   |     |   Comment #18
Not entirely accurate. 2.3% isn't the entire CPI that the "all items less food and energy" number. The CPI for "all items", according to the Bureau of Labor Statistics (BLS) was 2.05% in November. Which is an increase above 2%, the first it's been above 2% since April.

Here are the numbers (from the BLS) by month for 2019:
2019 JAN----FEB----MAR--APR---MAY---JUN----JUL----AUG--SEP---OCT---NOV
2019 1.55% 1.52% 1.86% 2.00% 1.79% 1.65% 1.81% 1.75% 1.71% 1.76% 2.05%

as you can see only April @ 2% and Nov @ 2.05% are at 2% or greater, the rest of the year has been below 2%.
Inflation > 2%
Inflation > 2%   |     |   Comment #20
Tell that to the Millennials who are saddled with massive debt due to soaring tuition costs on the inflation front. Retirees who have lost about 34% of their purchasing power on SS since the year 2000 due to inflation being far understated from reality which has allowed the government to game the COLA's to their advantage. To anyone who has had to pay for their own healthcare over the past decade. Rent as a percentage of incomes hit record highs not long ago. And the Fed as per yesterday's press conference wants to push even more inflation on us all...the beat goes on:

GreenDream   |     |   Comment #23
Tell that to healthy able-bodied Gen-Xers and Boomers who long ago paid off their tuitions costs and aren't yet collecting SS and own, instead of rent, their home (or live in their relatives basement, as the stereotype goes). You can't cherry pick certain areas of the economy/economic activity and hold that up as the "real" number (not if you wish to be taken seriously). People interact with the economy in different ways & will experience a different level of inflation depending on where they're at in their life and what parts of the economy they're involved in. Your pointing to the few areas of the economy where prices have increased faster ignores all the other areas where it hasn't. The overall inflation number, according to the BLS, for 2019, has been, as already previously stated:

2019 JAN----FEB----MAR--APR---MAY---JUN----JUL----AUG--SEP---OCT---NOV
2019 1.55% 1.52% 1.86% 2.00% 1.79% 1.65% 1.81% 1.75% 1.71% 1.76% 2.05%

You but look at X, Y, and Z cherry picks won't change that.

Are there areas, like tuition, that exceed those rates. Yep. Nobody ever claimed otherwise, equally there are areas that are below those rates as well (which you wish to ignore).

And, BTW, the SS COLAs aren't a matter of overall "inflation" being "higher" than reported, but rather a matter of what they use to determine the COLA being based on an index that doesn't reflect the typical Senior's interaction with the economy (that whole "different people interact with the economy differently" thing). But that's a whole different discussion. If you want to know more about that look into CPI-W vs CPI-E
GreenDream   |     |   Comment #25
And while you want to argue inflation as being higher than stated, there's equally an argument that it's actually lower because, you see, there's this thing people do called substitution. If Name Brand product A has gone up in price, consumers might switch to the cheaper competing Name Brand B or generic brand C instead. The BLS has an index for that as well, it's called the C-CPI-U index. While the inflation number for all items was 2.05 in Nov, the C-CPI-U was only 1.9.
Say What?
Say What?   |     |   Comment #26
The fact of the matter is that the CPI-U accurately measures overall inflation.
Where in the world do you come-up with SS losing 34% of it's purchasing power?
I trust the BLS numbers over some inflation conspiracy theorist posting on this site.
After all, they actually publish the numbers of all of the components of the index.
And, gather data each month from the real world out there.
Inflation > 2%
Inflation > 2%   |     |   Comment #29
@26 Not a conspiracy theory but it aligns well with the general trend that I have seen over the years. Here is an article that I referenced on the substantial 34% fall of SS purchasing power going back to the year 2000 that was posted on here and discussed at length a while back:

Predatory Depositor
Predatory Depositor   |     |   Comment #8
I don't get how you can argue with success. Record employment, record mean household wealth, record retirement savings, low inflation. More prosperity for more people then any nation has produced in the history of mankind. The US economy is the envy of the world once again.

It's impossible to have an economy that is perfect for everyone for lots of reasons not the least of which is that some people are going to make bad choices no matter what you do. The goal is to create the most good for the most people and that's precisely what's happening.
Kaight   |     |   Comment #10
Give me a credit card allowing me year after year to run up my debt balance without ever having to worry about repayment or taking responsibility in any way. . . . and I will come off looking absolutely spectacular, too. Household wealth and retirement savings, correctly adjusted to account for repayment of current national debt and to provide reserves to cover future payments already promised, would stink.

America is currently enjoying the proverbial "free lunch". Trouble is, there is no such thing as a free lunch.  Anyone who believes otherwise is delusional.
deplorable 1
deplorable 1   |     |   Comment #11
So when Obama dumped 20 trillion in debt on Trump's lap was this also Trump's fault? Then we had to start paying more interest on that debt. Trump inherited Obama's maxed out AMEX just as the 0% interest rate expired.
#28 - This comment has been removed for violating our comment policy.
deplorable 1
deplorable 1   |     |   Comment #42
Hey I'm just pointing out the facts and you Obama fans blamed Bush for 8 years straight. Don't complain about Trump's debt until there is any alternative candidate from the Democrat party who's policies would lower the debt. Fair enough?
rateshopper   |     |   Comment #14
Perhaps most insightful post and apt analogy of the last 10 years. Endless "money printing" and the Fed's shameless support of the stock market at any hint of decline has conditioned investors to this ten-year "free lunch" being the new normal. And all this comes at the expense of CD and income investors. Anyone who thinks this is indeed the new normal and is sustainable should be 100% in stocks. Otherwise, we CD investors should keep the faith.
Milty   |     |   Comment #12
@PD: please site your sources when claiming success on so many fronts, otherwise it begins to sound a bit more like hyperbole ;-) But, I think this group can agree that saving rates have been in the crapper for almost a decade, and now the prediction is for that to continue. This is not success for deposit account investors. Btw, according to Statisa,com: "The personal saving rate in the United States amounted to 8.8 percent in 2018, compared to 10.4 percent in 1960." (More currently, in 10/2019, savings rate is 7.8%.)

@D1: For me trade issues are a side show compared to rates, as soon as the rates reversed the markets rose and vice versa, albeit I admit trade tweets have also temporarily bounced the market. (I really don't see how the news media played a direct role in this other than reporting it.) However, I would be interested in hearing from you and others (Ken) your thoughts on the Fed's apparently new QE4 and this "repo" topic--how do these play a role versus the funding rate.
GreenDream   |     |   Comment #17
Milty, according to the Bureau of Labor statistics, the number of people employed in the United States hit a record 157,878,000 in August 2019 (which is the 21st time it's hit a record high during Trump's time in office, in other words it's been on a positive upward trend through most of his time in office).

According to a study by fidelity released in Nov 2019, employee savings rates hit a record high, the average employee contribution rate is 8.8%, which is nearly a full percentage point higher than a decade ago

According to Sentier Research (which tracks income on a monthly basis using census data), median household income has been steadily increasing under Trump, rising from $59,471 in Jan 2017 to $66,465 in Oct 2019. That's higher than it's been in at least 50 years — after adjusting for inflation.(for comparison, under Obama, household incomes continued to fall steeply for two full years after the recession officially ended, and then took four years to make up that lost ground. Incomes then flatlined again, posting no overall gain between August 2015 and December 2016).

inflation is at a low 1.6% through June 2019, as reported by the Bureau of Labor Statistics (come on, you've been reading these reports about the Fed, surely you didn't need to be told that inflation has been low, lower than the Fed's preferred "2%" target)

It's not hyperbole, it's stuff that you could easily verify yourself just with a few simple web searches
Milty   |     |   Comment #32
Of course, I've done the research . . . google Politifact's article regarding Obama's numbers vs Trump, who inherited a booming economy. I noticed you ignored the 10.6% savings rate in the 60s. It's not just does Trump have good economic numbers, but how do they compare percentage wise as well as the historical context. From a saver's point of view today, things are just not that good. Btw, my medical copay went up 20%, but thank god it was really only 1.6% . . . let's face it, when it comes to inflation so much depends on whose ox has been gored. Lastly, I think the biggest reason for the wage increase was due mainly to state minimum wage increases, but would need to reverify.
#45 - This comment has been removed for violating our comment policy.
Blowup in Debt Levels
Blowup in Debt Levels   |     |   Comment #19
@8 If you think success is blowing up the debt on the national, corporate and consumer fronts and provides a safe and stable foundation for both the economy and stock market then we must be living in a new world. All direct fallout from way too low for too long and the surge in money printing/bloated balance sheet. Fiscal discipline has long left the station both in DC/Congress and on behalf of the Fed especially over the past decade:

Predatory Depositor
Predatory Depositor   |     |   Comment #22
The fatal flaw behind the predictions of gloom and doom based on the current national debt is that it ignores the historical record. The big scary absolute number of dollars making up the debt is irrelevant. What's relevant is the ratio of that debt to the GDP.

In the 1940s the ratio of debt to GDP was about 21 percentage points higher than it is now. That decade was followed by a decade in which the the economy grew by 37% and the median family's purchasing power grew by 30% thanks to low inflation. Unemployment was only a little higher than it is now.

The ratio of debt to GDP can be lowered in two ways, by lowering the amount of debt or by increasing the GDP. If the GDP is high enough it doesn't matter if the debt is $500 trillion, life can still be very good. And the way to increase GDP is to reduce the tax and regulatory burden on the productive elements of the private sector (also known as wealthy people and corporations) to maximize their ability to invest in activities that create jobs and growth. Poor people don't create jobs for economic growth. But neither can their interests be served without the creation of wealth that such policies promote.

If you argue for less dependence on debt and at the same time argue for higher taxes and more regulation, you are arguing against yourself because the two are incompatible.
GreenDream   |     |   Comment #24
Indeed. What level of debt is "sustainable" (whether you are talking on a personal level or a national level) isn't based on an absolute number but on the relationship between debt and the resources at your disposal for paying it off. For example while a 10K debt sounds minor compared to a 100k debt, to a person making 15K/year, a 10K debt is a lot worse than a 100k debt would be for a person making 300k/year.
Predatory Depositor
Predatory Depositor   |     |   Comment #39
A sure way to increase the national debt is to raise taxes. I think we have enough decades of proof to back that up. The more taxes are raised the more government spends. They spend like drunken sailors. It's no different than a drug addict who says I promise I'll quit if you'll just give me one more fix.

The government is collecting more taxes today than it ever has in its history. Yet they're spending it even faster. You cannot solve a debt problem by increasing taxes. I'm not sure how many times we need to learn that same lesson.

I understand that it's not intuitive, but in fact the way to a manageable debt is by reducing taxes, reducing unnecessary regulation and liberating the private sector to do what it does best, create wealth. The way to reduce the burden of debt is to get growth out ahead of the debt curve, not to give a bigger meal to the beast that's eating you alive.

You can't tax your way out of debt but you can grow your way out of it.

Following on a previous comment which made an analogy to show how this translates to the personal level there seem to be the same two camps on this issue. Those who believe the way to get ahead is to go out and get a better job, and those who believe the way to get ahead is to get a bigger government check.

You can't fill up a pool by taking water out of one end with a bucket walking around to the other end and pouring it back in. And that's why the policies of those who are in the latter camp always fail.
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Predatory Depositor
Predatory Depositor   |     |   Comment #43
"Predatory Depositor, if you ever ran a business, you would know rich people do not create jobs."

What do rich people do with their wealth? Do they stuff their mattresses with cash? Burn it in their fireplaces? Sit in their living rooms wearing green visors counting the money, arranging it in stacks and lighting their cigars with hundred dollar bills?

What they do is invest that wealth in things that create more wealth and in the process create more jobs and more wealth for every one else too. Whether directly trough investment in privately held businesses, or indirectly through the capital markets, their wealth is put to work creating the buildings, factories and infrastructure that creates employment for workers, fulfills the needs of consumers, and provides the source of every penny that the government has at its disposal.
Dan   |     |   Comment #46
Across-the-board income tax cuts aren’t very cost effective. The CBO study found that, at best, they create 4 jobs for every $1 million in lost tax revenue.

Tax cuts for the middle class and poor do better. Middle-income families are likely to spend the tax cuts. During a recession, they need every dollar they can get. They pump the money directly into local shops, who hire more workers to meet the increased demand.
The CBO also compared that to the number of jobs created by other government programs. It included spending on infrastructure, increasing unemployment benefits, and aid to the states. The report found that extending unemployment benefits is more cost effective than any tax cut

Do tax cuts for the rich create jobs? High-income families are more likely to save their tax cut than spend it. During a recession, they don't need the extra money to maintain their standard of living. They already have savings and lines of credit to do that.
Predatory Depositor
Predatory Depositor   |     |   Comment #50
"Do tax cuts for the rich create jobs? High-income families are more likely to save their tax cut than spend it."

What does it mean when someone "saves" money?

It doesn't mean that that money remains dormant somehow escaping the economy.

If it is "saved" in a bank, it's used to finance loans for building or buying homes or providing capital for businesses to expand or fund operations. That creates jobs. If it saved in the capital markets, it does the same thing.

This notion that rich people are monetary hoarders is more about envy politics than economics.
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Predatory Depositor
Predatory Depositor   |     |   Comment #60
"Essentially none of the daily stock market trading "creates jobs." After the IPO, the stock market gains go to traders, not to company builders."

If there wasn't a secondary market for stocks, why would anyone buy the IPO? It's precisely because there is a strong secondary market that companies are able to raise the funding they need that results in job creation.
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GreenDream   |     |   Comment #49
And if you knew anything about economics and banking, Sam, you'd realize the banks aren't just sitting on that money that the rich people are depositing. It's being put to work in the economy creating more jobs. PD is exactly right on this while you, on the other hand, are absolutely wrong in claiming "that's EXACTLY what they/we are doing" when comparing putting money in bank deposits to stuffing mattresses with it.
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Dan for Bill Gates
Dan for Bill Gates   |     |   Comment #78
Bill Gates agrees and has previously said, “There’s no doubt that what we want government to do in terms of better education and better health care means that we need to collect more in taxes. And there’s no doubt that as we raise taxes, we can have most of that additional money come from those who are better off... I need to pay higher taxes.”
Dan for Marc Benioff
Dan for Marc Benioff   |     |   Comment #79
Salesforce chairman and cofounder Marc Benioff penned the latest in a string of billionaire op-eds calling for higher taxes on the wealthy. The California software entrepreneur, who ranked No. 93 on The Forbes 400 list of richest Americans released earlier this month, wrote that “increasing taxes on high-income individuals like myself would help generate the trillions of dollars that we desperately need to improve education and health care and fight climate change.”
Dan for Warren Buffet
Dan for Warren Buffet   |     |   Comment #80
Buffett advocated for a higher tax on the wealth years ago and in 2017 said on CNBC that the proposed elimination of the estate tax was “a terrible mistake.”
Dan for Eli Broad
Dan for Eli Broad   |     |   Comment #81
Philanthropist and retired entrepreneur Eli Broad, has supported some sort of wealth tax, which would draw from a taxpayer’s net worth.
Broad wrote in June, “I am not advocating an end to the capitalist system that’s yielded some of the greatest gains in prosperity and innovation in human history. I simply believe it’s time for those of us with great wealth to commit to reducing income inequality, starting with the demand to be taxed at a higher rate than everyone else.”
GreenDream   |     |   Comment #90
Dan quoting Bill Gates: "I need to pay higher taxes.”

Well, Bill, you can pay higher taxes any time you want. Just cut the IRS a check for as much more as you want at anytime you feel they're not already getting enough of your money. No need to force other people to pay higher taxes just because you claim to want to (though, I suspect anyone inspecting your tax returns would find that you use every tax break you can get to lower your taxes, just like everyone else in your tax bracket, which would make you a liar and a hypocrite).
Dan   |     |   Comment #91
Gates, the founder of Microsoft and for many years the richest man in the world, has along with his wife given away more than $35 billion through the Bill and Melinda Gates Foundation. They plan to give away nearly all of their wealth.

The Gates Foundation spends more on global health each year than most countries. Their work has saved millions of lives.
Gates: “I think our system can be a lot more progressive (that is richer people paying a higher share).

“A key element is making capital gains taxation more like ordinary income (some have suggested making them the same) and having an estate tax more like we had in the past (55% above $3.5M).

“European countries collect a lot more taxes but through consumption taxes, but those are not progressive.
So yes, I have paid $10B but I should have had to pay more on my capital gains.”
There should be more transparency so it is clear who [owes] what and how loopholes are reducing tax collection. Countries need to work with each other on this.
GreenDream   |     |   Comment #95
Dan quoting Gates: So yes, I have paid $10B but I should have had to pay more on my capital gains.”

Then write a check for more. Nobody is stopping you Bill
Reality   |     |   Comment #96
I've heard this before. Sure Gates gives away a lot of money but as a percentage of his GROWING assets it's not big deal. I do not know his motives but it sure keeps the D haters at bay when you give some away. It's a game played by rich folks throughout history.
Ask yourself a simple question: How difficult would it be for you to live in a 100M home with virtually endless wealth to be generous? Yep, not hard at all.
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Dan   |     |   Comment #36
Also, deficit-financed tax cuts would eventually have to be paid for through increases in other taxes or cuts to government services. Social Security, Medicare, and low-income programs would be especially vulnerable, and the fiscal squeeze would mean fewer resources for additional needed investments in areas like infrastructure and education that could help the economy, jobs, and wages over time
The Trump administration has said economic growth will pay for the added debt and deficit burden, but so far that hasn’t been the case despite the fastest GDP gains of the recovery.
GreenDream   |     |   Comment #56
Or to look at it another way, Obama pretty much doubled the debt in 8 years (public debt more than doubled from 6.3T to 14.4T while total debt comes in slightly under double having gone from 10T to 19.5T). Trump would need to be president for 16 years to hope to match Obama's debt record considering he's racking up debt at half the pace Obama did.
Sam Spade
Sam Spade   |     |   Comment #63
Green Dream is right, only count half the debt incurred by Trump and the math works out real nice.
GreenDream   |     |   Comment #66
I am right, but it's not by counting "half of trumps debt". Trump is racking up debt at a slower pace than Obama did. That's a fact regardless of what you wish to believe. And your rudeness doesn't change those facts and those facts don't care about your rudeness.
Whin Ger
Whin Ger   |     |   Comment #77
The chart you link to lists the debt at the end of May 2019, not September 2019, when FY 2019 actually ends.


Absolutely incoherent for Trump fans to whinge about rudeness.
GreenDream   |     |   Comment #51
Say What? That's not a problem of not taxing enough, that a problem of spending too much. It's hard to grow out of debt when you keep spending more than you take in. While PD is entirely correct when he states that "The government is collecting more taxes today than it ever has in its history", the problem is the government is also *spending* more today than it ever has in its history.
Predatory Depositor
Predatory Depositor   |     |   Comment #72
"The government is collecting more taxes today than it ever has in its history", the problem is the government is also *spending* more today than it ever has in its history."

I think the lessons of history are clear on this point. For every extra dollar the government collects in taxes, it spends two dollars.

It's a function of human nature. When you're spending someone else's money you spare no expense: especially when handing out that money is the source of your political power.

You can't fight human nature any more than you can fight mother nature. Attempting to reduce debt by increasing taxes is a fool's game. And that's why it never works.

The only way to reduce the *burden* of debt is through supply-side economics: creating wealth by increasing incentives and reducing disincentives for those who create it.
GreenDream   |     |   Comment #53
Also, in FY 2016 (which was before the tax cuts) Obama added 1.2 trillion to the debt, in FY 2019 (which was after the tax cuts) Trump added 0.4 Trillion (that's 1/3rd of what Obama added in FY 2016). FY = Fiscal year, which for the US government ends on Sep 30th of the calendar year. The US is currently in FY 2020, which started on Oct 1st 2019.

Obama's first three years added 4 Trillion to the debt, Trump's first three years added half that. Obama average an 8.8% increase in debt per year during his time in office. Trump is averaging a 3% increase in debt per year. Still bad but nowhere near as bad as under Obama.
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GreenDream   |     |   Comment #59
Sam, Obama ADDED 1.2T with FY 2016 Trump added 0.4 in FY 2019. deny reality all you want, doesn't change the facts
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GreenDream   |     |   Comment #58
You are wrong, Trump added 0.4 Trillion in debt in FY 2019 ($420,475,731,272.32 to be exact)
You are thinking of FY 2018 not FY 2019. in FY 2018 he added 1.3T which is less than the 1.6T Obama added at the same point in his presidency. Obama only had less than 1T debt twice in his 8 years in office. Trumps has already had 2 years of less than 1T debt. When it comes to debt, Trump doesn't hold a candle to Obama's record.
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GreenDream   |     |   Comment #67
But even if you want to magically add another 2T to Trumps total for his first 3 years in office, it would *STILL* be less than Obama racked up in his first 3 years. Trump doesn't hold a candle to Obama's debt record.
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Apples/Oranges   |     |   Comment #82
#53 Apples and oranges comparison. Obama inherited a crashing economy during a period when even Treasury Sec. Tim Geithner admitted that there were runs on banks, etc. Trump a recovering economy. Both have been blowing up debt along with both parties of Congress like there is no tomorrow.
Blowup In Debt Levels
Blowup In Debt Levels   |     |   Comment #33
@22 If the economy is that great why has it been such a struggle to get monetary policy back to neutral? We tried last year and the market had a convulsion during Q4. Ben Bernanke promised us that the balance sheet would be normalized after things stabilized post the great recession of 2008. Here we are a decade later and the balance sheet is hitting a new high for all of 2019 and we're still below neutral even by Powell's public comments. IMO the market is doing well mainly due to all the liquidity out there. Take the morphine/punch bowl away and normalize policy and no doubt we'd be a lot lower. God forbid we go into a recession the next year or two given how low rates are currently combined with quite high debt levels.

Enjoy the ride but be nimble when the music stops playing.
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Say What?
Say What?   |     |   Comment #27
Please spare me the flag waving.
I've actually lived and worked in foreign countries.
When you factor in health care costs and vacation time, Europeans do quite well.
Germany has 6 weeks of mandatory vacation time.
Oh, and Germany has the highest balance of payments (CIA factbook, 2017).
The US has the honor of having the highest deficit.
Sprechen sie Deutsch?
Achtung, Baby
Achtung, Baby   |     |   Comment #31
Yeah? So what kind of interest rates are they getting in Germany these days? Last I heard, it was U-boat territory - i.e., underwater.
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Achtung, Baby
Achtung, Baby   |     |   Comment #44
Gee Sam, sounds like you're talking out of both sides of your mouth again. "The US government has to pay the highest interest rates in the world, to get people to buy our debt.", you say? Well, who do you think they're paying that interest to, for the most part? Largely it's your buddies here, fellow Americans (who are buying t-bills and other debt), and largely, on this website, they're complaining loudly, because that interest is not high ENOUGH for them!

Germany and several other countries in Europe are a hair away from recession, Sam - sound's like that's just fine with you!
Truth Teller
Truth Teller   |     |   Comment #89
Say What? #27, yeah but we defended the German form the Russia for 70 years, we paid their military dues for decades and we provided seed money after the war and made the Germany economy in our image, the taxpayers rescued the Germans from themselves and we still have bases there for their own securities and provide $10 billions every year to maintain those bases. If they have not received the USA help, well, remember the East Germany economy until the wall came down, that was the German destiny.
Dan   |     |   Comment #92
We keep bases in Germany because it’s easier/faster to engage from there than from here in the US when the engagement is in Europe or the Middle East. We can deploy a force into places on that side of the planet quickly because we are already there with a pre-positioned force and materials.
We keep bases in Asia for the same reason - it’s easier to deploy from Japan or South Korea into N. Korea, China, or Eastern Russia from there than from Hawaii and California.

Simply having the force present there is deterrent to those who might decide to act against our interests. More importantly though, it’s an expedience for the United States military
NATO is the only alliance capable of sharing some of the global military burdens that have overstretched America's ground forces.
The American military hospital at Ramstein Air Base, the largest outside the United States, provided specialized care for battlefield casualties from Iraq and Afghanistan as it did for those from Bosnia, Kosovo and the U.S.S. Cole.
In 2004, nearly 15 years after the Berlin Wall fell, United States force levels in Germany had dropped by roughly 75 percent.
Jerry   |     |   Comment #93
Dan #92, you missed the point, the Germany would have been dissolved and pulled apart if it was not for USA to rebuild them and now they are our adversary in economy, politics and technology know how. They pretend that was our duty to save them from the Russians knocking on their boarders. That tells you something, never interfere into foreign nations if we do not want to be used for eternity as cash cow and unimportant to them.
Dan   |     |   Comment #94
In the immediate aftermath of World War II, the most important question for the victorious Allies was not whether such a heavily damaged region could ever recover, but whether it should ever recover. Germany's future lay entirely in the Allies' hands, and Germany's former enemies had little sympathy toward the country. Twice in as many generations, the Allies thought, Germany had instigated European wars that had become global conflicts.
A number of developments shortly after the war caused a radical revision of U.S. policy toward Germany. First, U.S. officials realized that resentment toward the Versailles treaty, the punitive postWorld War I settlement, had contributed to the rise of fascism in Germany and to the outbreak of World War II. It would have been foolish for the Allies to risk fueling future German resentment by pursuing an equally harsh arrangement after 1945. Second, humanitarian concern not only to prevent mass starvation and destitution in Germany at the war's end but also to allow Germans to pursue a decent standard of living soon influenced Allied policy. Third, a revival of German industry and commerce would help offset the cost of occupation
The onset of the cold war in Europe was a fourth reason why the United States abandoned its punitive policy toward Germany. As the war came to an end, barely concealed animosity between the United States and the Soviet Union rapidly came to the fore. Fueled by economic, political, and military rivalry in the guise of an ideological crusade, the cold war divided the continent into a U.S.-dominated West and a Soviet-occupied East. The strategic fault line ran through Germany and resulted in the country's partition until 1990. Under the circumstances, West Germany's economic development was clearly in the interests of the United States. An economically strong West Germany could bolster Western Europe's defenses and undermine support for indigenous Communist parties.

According to the U.S. Department of State Nov 4 2019 Bureau of European and Eurasian Affairs

Germany is one of the United States’ closest and strongest allies in Europe. U.S. relations with Germany are based on our close and vital relationship as friends, trading partners, and allies sharing common institutions. Our political, economic, and security relationships, critical to shared prosperity and continued stability, are based on extensive people-to-people ties and close coordination at the most senior levels.
In the political sphere, Germany stands at the center of European affairs and plays a key leadership role as a member of the G-7, G-20, the North Atlantic Treaty Organization (NATO) and the Organization on Security and Cooperation in Europe (OSCE). The United States recognizes that the security and prosperity of the United States and Germany significantly depend on each other. Etc.

I don't think the State Department agrees the your assessment #93 that they're our adversary.
Predatory Depositor
Predatory Depositor   |     |   Comment #99
I don't think Germany is our "adversary" in a military or even economic sense. But I don't think the reason the US has military bases there is entirely because it's a good strategic location for a base. German aggression was the at the heart of the reason for both world wars. And to this day there is an element of the population there that still creates legitimate concern that the hatred within that country that gave rise to their past atrocities has not been completely purged.
deplorable 1
deplorable 1   |     |   Comment #9
All over trade war fears Milty which were hyped by the MSM as the end of the world. The FED did not need to cut rates and should have just paused.
Rickny   |     |   Comment #13
And Trump keeps saying that rates should be lower.
111   |     |   Comment #15
Milty, # 5 - You stated that "this site is about deposit accounts not brokerage." From what I have seen, this site includes at least two groups of people - those who are primarily, or in some cases only, interested in deposit accounts, and those who are interested in deposit accounts as a part (the less volatile part) of their overall diversified financial strategy. On some subjects the goals of each group converge; on others they may diverge. Surely you're not suggesting that one group or the other should be banned from the "big tent", or muzzled?
Predatory Depositor
Predatory Depositor   |     |   Comment #21
Context matters. Context makes the understanding of any topic relevant and meaningful. You can't see deposit accounts in the proper context without appropriate discussion about the bigger investment picture any more than you can see Fed policy in the proper context without appropriate discussion about the political environment.
Milty   |     |   Comment #34
@111:. Am not suggesting suppressing free speech, just arguing that it should come as no surprise that this web site's purpose is to inform on deposit rates, where certainly the majority here are looking for positive news, rather than looking to promote the inverse. Regarding your 2 groups, I would hope both would be looking for information favorable to deposit account rates. Are you suggesting that we should just accept our fate and be sacrificed on the altar of stocks?
111   |     |   Comment #38
Milty, #34 - I'm suggesting that everyone here should take a rational, studied approach to their own and their families' needs, long-term and short. In my opinion (since you asked), I'm suggesting that there is a huge amount of evidence, empirical as well as academic, that suggests that over most timeframes (especially mid- to long-term), there is overwhelming evidence that stocks outperform less volatile investments like bonds and CDs, albeit with more risk in the short-term.

I'm further suggesting that in many scenarios (perhaps excluding the completely end-of-life scenarios, OR those where folks are so expressly emotionally frightened of equities that they literally find themselves unable to invest in them at all), that nearly every portfolio should have some exposure to equities.
sinclairL   |     |   Comment #68
111, #38: I don't disagree with your understanding of investing in stocks and its possible returns, in fact, besides having inherited or started your own business, I believe investing in stocks is perhaps the only way to real wealth for most vs watching your lowly CD grow. Unfortunately, we are mortal and have to decide when to take our gains and go home. I chose to get mostly out after reaching a certain milestone that would net me more yearly income in retirement than when I was working (albeit am still working because I like to). On the other hand, I know those that had to retire in the 2008/2009 timeframe, and they got burned because they needed their funds and couldn't wait for the recovery. So, I don't disagree with you about the value of investing in stocks, but have found getting out of stocks is actually harder than getting in, deciding when to sell. But this site is about deposit accounts, and so now that I got that big bundle of cash am interested in living off its interest, that is, if the Fed will stop interfering, and this site and its contributors have helped me do that. However, I agree to each their own in handling their accounts, some may have the resources later in life to be heavily invested in stocks without concern for the downside, and others may not. My concern, which started our conversation, is that the Fed seems to be continuing to game the system in favor of stocks to the detriment of the savers, which have been paying a price now for quite some time, and by pushing stocks, with not alternative, may actually have created a serious bubble in the market.
Milty   |     |   Comment #75
@68: hmm, certainly don't disagree . . . everyone needs to decide what's best for themselves. At this stage of the game, I too am more out than in the market, just want to sit back live on my SS and enjoy my interests.
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kcfield   |     |   Comment #35
Update: AMEX Savings just lowered their savings APR by another 5 basis points--to 1.70%. It is very unusual of them to do this after the Fed held steady on their rates; they tend to hold steadier on their rates than most other banks.
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Gone Fishin'
Gone Fishin'   |     |   Comment #87
Just give me my 1.70% savings account, and my SS check, my fishing pole, and a case of Corona Extra.... I'm good.
Predatory Depositor
Predatory Depositor   |     |   Comment #88
A poignant reminder, having nothing does give one great freedom.
Reality   |     |   Comment #98
That's nonsensical. Ask the guy freezing on the street how free they feel. I'm free because i have enough wealth to go fishing without worry about where the next meal comes from.
Reality   |     |   Comment #97
When the market turns south you'll be glad you're in cash.
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Fed Meeting: 3rd Straight Rate Cut - Review of Impact to Savers

The Fed decided to lower rates for the third time. The target range of the federal funds rate was reduced 25 bps to 1.50% to 1.75%. We are now down 75 bps from the recent peak of the target range for the federal funds rate.

The following is an excerpt of today’s FOMC statement with the all important rate cut description:

The big change in today’s FOMC statement as compared to the September statement was the suggestion that the Fed has moved back to a pause mode. Here’s what changed in...

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Fed Meeting: Another Rate Cut - Review of Impact to Savers

The Fed decided to lower rates again. As expected, the target range of the federal funds rate was reduced 25 bps to 1.75% to 2.00%. We are now down 50 bps from the recent peak of the target range for the federal funds rate. It should be remembered that we never had two rate hikes at two consecutive Fed meetings in the last rate hiking cycle. This current pace of rate cutting is twice the rate hiking pace that we experienced, and that is without any indication that the...

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Fed Cuts Rates - Predictions with Savings Account and CD Strategies

For the first time since December 2008, the Fed has cut the federal funds rate. The target range for the federal funds rate was lowered 25 basis points to 2.00%-2.25%. The following is an excerpt from today’s FOMC statement announcing the rate cut:

The justification for the cut is based on just “global developments” and “muted inflation pressures”. The justification wasn’t based on the state of the economy which is strong.

In addition to the rate cut, the Fed also decided to stop reducing its balance sheet two months earlier than...

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The Fed Opens Door to Rate Cuts - Rate Predictions & CD Strategies

The Fed decided to hold steady on rates, but it did make an important change to the FOMC statement which opens the door to future rate cuts. The Fed removed the “patient” sentence and replaced it with the sentence that states the Fed “will act as appropriate.” The following are excerpts of today’s statement and May’s statement that shows what replaced the “patient” sentence:

May 1 FOMC Statement excerpt:

June 19 FOMC Statement excerpt:

Not all FOMC voting members agreed to hold steady on rates. According to the statement:

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The Fed’s Pause Continues - Rate Predictions & CD Strategies for 2019

As expected, the Fed reaffirmed its “patience” policy by holding steady with the federal funds rate target. The post-meeting statement contained the same patience language that was in previous meeting statements:

One change from the March statement is the description of growth of economic activity. In March, the statement read, “growth of economic activity has slowed from its solid rate in the fourth quarter.” Today’s statement read, “economic activity rose at a solid rate.” This change should reduce the odds of a 2019 Fed rate cut.

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