Dear Dr. Don,
When do you think CD rates might increase?
— Gregory Goesup
My crystal ball is pretty cloudy on this issue. The Federal Reserve is keeping short-term interest rates low, and inflation hasn’t been much of an issue. Inflation is so low that 2011 is the second straight year that Social Security recipients won’t receive a cost-of-living increase in their monthly checks.
CD investors generally invest in short-term deposits with terms of five years or less. Using Bankrate’s Compare Rates and Rate Watch features, I came up with the following yields (annual percentage yield and Treasury security yield) for CDs and U.S. Treasury securities:
I put the Treasuries in there because you’re not going to see CD rates head higher until you see short-intermediate Treasury yields head higher. That’s not in the cards anytime soon, as long as the Fed keeps adding liquidity to the banking system.
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