CD Rate Trend Index

It appears we are in a bottoming-out phase at this point. There is not much more room to cut on the downside and there is not enough compelling evidence that rates need to go higher yet either. I expect things to sit tight until the dog days of summer begin to pass. After that, we could see rates head north into the end of the year and maybe beyond.
Jason Flurry, CFP, president, Legacy Partners Financial Group, Woodstock, Ga.

To quote Warren Buffett, "I think the 'flation' part will heat up and I think the 'stag' part will get worse." The Fed is in such a quandary and, as in all stagflation situations -- you soon realize that interest rates will not be the prescription written. Also, with the spike in oil and commodities, I think some of the Fed's dirty work will be done, at least initially. Couple this with an election year and the general consensus seems to be one more rate hike for this year. So maybe by year-end we will be at 2.5 percent on the Fed's benchmark (1/2 point higher). That being said, all bets are off for next year though. I believe the short end of the CD market will have some upward movement on the yield because of the increased capital needs of the banks. Some banks need to raise more capital and are prepared, on the short side at least, to price their CDs accordingly.

My strong recommendation is still for the CD consumer to stick to shorter CD maturities. Even though my July outlook for CDs is "unchanged" for one-year plus maturities, I am not saying that CD rates in one year will be unchanged from where they are today. I believe quite the opposite in fact. The continued fallout of the capital markets and the need for financial institutions to price their risk higher, point to higher interest rates. Add to that a possible 4.5 percent plus inflation rate and it's going to be hard for banks to sell CDs to consumers at these current rates for much longer.

Long and short -- CD consumers need to decide what type of after-tax return is acceptable when inflation runs at 4 percent plus. A CD consumer generally wants safety, but isn't purchasing-power loss a real loss in real terms? CD consumers need to start investigating other safe alternatives for their conservative investment dollars.
Michelle Ford, CFP, vice president, Vantage Point Financial Services, Fort Washington, Pa.

With the Fed on the sidelines for the next several months, some of the momentum in CD yields will stall. But the general direction remains the same.
Greg McBride, senior financial analyst, Bankrate.com

Bankrate surveys over the past two months show the average yield for three-month CDs dropping by a few basis points while the average yields for six-month, one-year and five-year CDs have risen by 25 basis points, 23 basis points and 55 basis points, respectively. If you're determined to buy CDs, the six-month is probably the best bet, although none of the average yields are really worth locking up your money. If we're moving into a rising rate environment, it's important to keep your maturities short so you'll be able to take advantage of higher yields as they are available.
Laura Bruce, senior reporter, Bankrate.com