CD Rate Impact Of Fed Choice

Kaight | Oct 26, 2017 | 1,192 posts since 2011

President Trump has promised to reveal his choice for Fed chair soon. Whomever he chooses will influence the rapidity of Fed rate hikes going forward. Smart financial institutions will evaluate their situations promptly, once the selection becomes known. I can envision some taking action on CD rates preemptively, depending on Trump's decision. Bottom line, the announcement could trigger higher rates as financial institutions seek to gather in funds now at lower cost than will be the case after the third of February upcoming.

Suggestion is to monitor carefully President Trump's Fed chair nominee and consider impact of that individual on CD rates going forward.

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Bozo | Oct 26, 2017 | 1,375 posts since 2011

I'm less sanguine. As I've noted on other threads, I had a discussion with my local banker about CD rates some months ago. The discussion turned to the FedFundsRate and she basically yawned. As she noted, her bank's CD rates were set by two factors: (a) supply, and (b) cross-marketing. As to supply, she noted her bank had waaaay more cash than they could profitably peddle. As to (b), cross-marketing did elicit some interest, but only as to new money accounts.

The FedFundsRate had zero impact on her bank's CD strategy.

As she noted, we CD savers are "retail money". When her bank can get wholesale money cheaper, and easier, cross-marketing is the only way to turn a profit.

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