This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Inflation Gives Savings Accounts A Break -- For Now

Consumer prices generally declined during the month of November, giving the purchasing power of U.S. savings accounts a rare boost. This was an encouraging development, but it's not likely to be a long-term solution for getting more value from savings accounts.

Last Friday, the Bureau of Labor Statistics announced that the Consumer Price Index (CPI) declined by 0.3 percent during November. This episode of deflation represents a reversal of a trend from just a few months ago, when inflation seemed to be getting out of hand. However, some additional details from the CPI report suggest that you should not expect falling prices to become the norm.

Getting gasoline prices under control

Gasoline prices have been volatile in recent years, and have tended to lead the way for inflation in general. In this case, the overall decline in prices was largely due to gasoline prices getting back under control after a late summer flare-up.

The CPI is composed of prices on a range of goods and services intended to represent a typical consumer's buying experiences. One of these components is gasoline, and this part of CPI declined by 7.4 percent in November. However, that decline is just the flip-side of the sharp rise in gas prices that pushed inflation up by 0.6 percent a month in August and September.

This is fairly typical of the course that inflation tends to chart. Month-to-month figures can be quite erratic, and an unusual increase one month is often cancelled out by a decline a month or two later. For example, over the past 12 months prices have neither soared nor declined, but instead have risen at by a moderate 1.8 percent.

A brief respite for savings accounts

According to the FDIC, the average interest rate for savings accounts these days is just 0.07 percent. Compared to that rate of interest, even 1.8 percent of inflation is a problem. It means that the purchasing power of savings accounts has declined over the past year, which has been the trend generally since the Great Recession.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free


Chart of I:DJI
DOW 17,832.37 +20.18 0.11%
S&P 500 2,091.85 +2.71 0.13%
NASDAQ 5,120.49 +17.6820 0.35%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs