If you're annoyed about rock-bottom CD rates, take some comfort in the fact that Federal Reserve Chairman Ben Bernanke feels your pain. When asked about the issue by Bankrate contributor Katherine Lewis at a press conference last week, Bernanke acknowledged Federal Reserve policies, including Operation Twist, were pushing down yields on CDs:
We are quite aware that very low interest rates, particularly for a protracted period, do have costs for a lot of people. They have costs for savers.
But Bernanke insisted that while they may be painful for CD investors in the short term, the Federal Reserve's monetary easing efforts are better for everyone in the long run:
I think the response is though that there is a greater good here, which is the health and recovery of the U.S. economy and for that purpose, we've been keeping monetary policy conditions accommodative trying to support the recovery, trying to support job creation.
After all, savers are not going to get very good returns in an economy which is in a deep recession. And ultimately, if you want to earn money in your investments, you have to invest in an economy which is growing.
And so, we believe that our policy will ultimately benefit not just workers and firms and households in general but will benefit savers as well as the returns that they can earn on their investments will improve with the improvement in the economy.
The Federal Reserve's single-minded focus on achieving its dual mandate of stable prices and full employment at the expense of significant swaths of the American public isn't anything new.
You'll recall in the 1980s that when then-Chairman Paul Volcker was battling inflation with sky-high interest rates, many consumers were angry about mortgage rates in excess of 12 percent, but those complaints largely fell on deaf ears. Savers did pretty well during that period, but now that's been reversed; savers are suffering, and borrowers are golden.
Still, this can't be heartening for CD investors who depend on CD yields to pay at least a portion of their living expenses. The Fed has pledged to keep the federal funds rate target near zero until 2013 at least, so it looks to be a lean year.
What do you think? Should CD investors be asked to make sacrifices for the "greater good"? Should the Fed be paying more attention to the needs of CD investors?