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Fed meets: CD rates stay low

By Sheyna Steiner ·
Wednesday, April 25, 2012
Posted: 1 pm ET

The group in charge of monetary policy at the Federal Reserve, the Federal Open Market Committee, or FOMC, met this week for the third time this year. They voted to keep short-term interest rates targeted between zero percent and 0.25 percent.

The short-term interest rate controlled by the Fed is also known as the federal funds rate. It  influences the rate paid to depositors at banks and the interest rate borrowers pay on credit cards and home equity lines of credit.

Though this week's decision was not unexpected, it's disappointing to savers struggling with low interest rates on saving instruments such as CDs and money market accounts.

As this Bankrate story noted earlier this week, CD rates could increase before the Fed hikes interest rates. The federal funds rate isn't expected to move until 2014.

In order for CD rates to increase independent of the Fed, the economy needs to heat up so that businesses start borrowing again. If lending activity speeds up, banks may need more deposits which will force them to offer attractive interest rates to depositors.

Of course, if the economy really gets going, the Fed may raise short-term rates before 2014.

How have low interest rates affected you?

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American Serf
April 28, 2012 at 2:35 pm

The "Fed" represents the interests of Wall St, not the interests of average Americans and those who would prefer to save conservatively, instead of gambling at a casino run by insiders and thieves. "Thieves" you say? Yes they are thieves whose greed drove them to take excessive risk and gamble with our economy and when they lost, instead of being forced into bankruptcy, they were made whole by the Federal Reserve and Congress.

April 25, 2012 at 4:39 pm

groan, U don't want my opinion as it would be "removed" as usual, so just pour me another double so I can keep dancing with myself, smirks!