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CD rates to dip after Fed move

By Sheyna Steiner · Bankrate.com
Thursday, December 13, 2012
Posted: 12 pm ET

Following this week's meeting of the Federal Reserve's Open Market Committee, the quantitative easing program known as QE3, signifying a third round of quantitative easing, was expanded. The rate-setting committee also voted to keep benchmark interest rates extremely low.

With Operation Twist ending at the close of 2012, outright purchases of $45 billion in Treasury securities will be added to the $40 billion of mortgage-backed securities that the central bank is buying every month under QE3.

As this move slightly increases the level of support in the economy, it could push the yields on Treasury securities even lower, which means mortgages may get even cheaper. Good news for homebuyers is bad news for savers who rely on certificates of deposit because CD rates could fall even more as well. If banks earn less on loans, they have no choice but to pay less on savings vehicles such as CDs.

What did you think of the results of this week's Fed meeting?

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2 Comments
Gretchen
December 19, 2012 at 10:55 am

Seems to me that the people who worked hard, lived responsibly, and managed to save a bit for retirement are being punished. On the other hand, many who do not deserve it are being rewarded by this government. Also, doesn't prolonged low interest rates bring on hyper-inflation? The problem there is, apparently, most government officials don't buy their own groceries.

Dorothy
December 17, 2012 at 6:14 pm

I just think this is a plan to discourage people from having money in banks. People will not want to save any money for their old age. Enough is enough. I say you do not have to raise the rates to 5% like it used to be but do not lower it any more. How can people save and live off the interest to subsidize their social security. This is not fair to people who have saved looking for their old age...