CD Rate Trend Index

Invest overseas. As our dollar continues to depreciate -- which I believe is by design -- having euro bills in the mattress may be a much better investment than placing your money in a bank or money market fund. I expect the yield curve to get a bit steeper before short-term rates stabilize. I do not expect long-term rates to go down in any appreciable amount due to the inevitability of higher inflation during the next decade (partially resulting from the decline of the dollar).
Benjamin Tobias, CFP Tobias Financial Advisors, Plantation, Fla.

With a federal funds rate at 2.25 percent, the lowest since 2005, investors are faced with receiving interest on their short-term investments that may not even outpace inflation. This presents a pitfall for investors who may be tempted to take on riskier investments or longer-term investments to make up for lost yield. It is important to remember that the Fed reiterated during its meeting that "downside risk to growth remains," suggesting that they may be forced to cut rates further. While we may be nearing the bottom, low interest rates for extended periods of time tend to create an environment of higher inflation which would eventually force the Fed to ratchet interest rates back up. Because of this, investors should resist the temptation to lock up low interest rates for long periods of time, instead focusing on maintaining the flexibility and liquidity to react to the changing economic environment.
Kurt J. Rossi, CFP, CRPC, Independent Wealth Management, Wall, N.J.

Rates have really moved down with the upheaval in the financial markets. While rates have basically gone straight down, we think there needs to be a digestive process and thus, we do not expect much movement in rates over the near term.
Herbert G. Hopwood III, CFP, CFA, president Hopwood Financial Services Inc., Great Falls, Va.

If you have been diligent in watching your finances over the last several years, you now have the privilege of paying the tab for those who were not. As the Fed forces rates down to improve liquidity, it acts like a hidden tax on savers. Combine this with price inflation, particularly on the commodity front, and you have a bad scenario. My suggestion is try to keep your maturities in the short to medium range and DO NOT stretch for yield. Forgo that little extra yield for liquidity.
William Z. Suplee IV, CFA, CFP Structured Asset Management Inc., Paoli, Pa.

The real questions are: How low can the Fed take rates and how will affect me? Let's look at some recent historic events to get a better perspective. In 2001, the Fed cut the federal funds rates 11 times. That's almost every month of that year. Actually, they cut twice in January, starting from a rate of 6.5 percent and ended the year at 1.75 percent. In 2002, they cut the rate once more by one-half percent, lowering the rate to 1.25 percent. In June 2003, the rate was cut by one-quarter percent to the historic low of 1 percent. The 1 percent rate remained for one full year until June 2004 when the Fed raised rates 17 straight times, pushing the rate from 1 percent to 5.25 percent. In this round of cutting, the Fed has lowered rates six times, for a total of 300 basis points, and we believe that the Fed will certainly cut another 75 basis points with a target federal funds rate of 1.5 percent. We do believe that this should be the bottom and the end of the cuts. Our suggestion for CD buyers is to hold tight until the fourth quarter. A rally in equities market will have more to do with raising deposits rates than the Fed.
Martin P. Mesecke, CFP, Self Worth Financial Planning LLC, Plano, Texas

For savers, the Fed can't stop cutting rates soon enough. If the goal is to preserve principal, then sometimes you must take what the market gives you. Shorter maturities will give you the flexibility to regularly survey the landscape and be best positioned whenever yields rebound.
Greg McBride, senior financial analyst, Bankrate.com

Unless there's a remarkable turn of events, it wouldn't be surprising to see the Fed cut rates again this month, although we can always hope they're done. Be careful in your search for yield -- stay with top-of-the-line options. Considering the overall situation, there are still some decent rates being offered in high-yield, FDIC-insured CDs.
Laura Bruce, senior reporter, Bankrate.com