If Interest Rates Rise How Will That Affect CD Rates?

  |     |   22 posts since 2013

When interest rates go up, how much will a 2 year CD go up from, for example,  1.50 APY? Will the increase be small or more significant?  Are we looking at a 2 year CD after the rate rise bringing in, for example, 1.70 or 2.0?  Will that happen immediately or take a few months  or weeks fter the rate rise by the FED?

  |     |   4,118 posts since 2010
Unfortunately, I don't believe anyone can answer those questions with any certainty. Besides there are other factors to consider besides the Fed raising short-term interest rates.
Bank’s do not always want more depositor funds. The business of banks is to borrow money and loan it at a higher rate. However, banks need to be able to find attractive places to lend their money. If they cannot find many good opportunities to lend, then they will not be interested in getting new deposits and will keep rates at the current low levels.  What could make finding good lending opportunities hard for banks: 1) A faltering or stalling real estate market . 2) Low demand from corporate borrowers (who have raised tons of  cash over the last couple years).

CD Interest Rate Forecast 2014
  |     |   3,073 posts since 2010
Also some banks cannot raise rates because of the health of their banks. 
  |     |   2,641 posts since 2011
The bigger question is will they go up for any significant amount at all or are they still playing these rate games with us?  Time will tell.

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