Savings Rates Could Head Even Lower

NEW YORK ( TheStreet) -- Consumers could see interest rates on their savings accounts fall even lower early next year.

RateWatch -- a subsidiary of TheStreet that tracks interest rate data for over 90,000 financial service offices in the United States -- reported on Tuesday that average interest rates for 1 month CDs and 4 year CDs each declined by one basis point nationally, while overall interest rates on savings products remained at very low levels.

The national average rate for a one-month CD with a balance of less than $10,000 was 0.07%, while the rate for a four-year CD was 0.71%.

The Federal Reserve has indicated that it is likely to keep its short-term federal funds target range within the current range of zero to 0.25% until at least 2014. The federal funds rate has been in this historically narrow range since late 2008.

As part of its third major round of quantitative easing announced in September, the Fed is purchasing $40 billion in long-term mortgage backed securities each month and continuing to purchase roughly $45 billion in long-term Treasury securities each month. The purchases of long-term Treasuries are balanced by selling similar amounts of short-term Treasury paper, in an effort to keep the yield curve as flat as possible, in an effort known as "Operation Twist."

Neil Soss -- the chief economist for Credit Suisse Holdings USA -- said in a report on Monday that by the end of the year, the Fed's monthly sales of short-term securities "will have ended," which could have the effect of pushing short-term rates even lower, as the market supply declines.

Soss said that "an announcement to this effect will probably be included in the policy statement" next week after the Federal Reserve Open Market Committee holds its next round of meetings on Dec. 11 and Dec. 12. Of course, suspending the sales of short-term treasuries will accelerate the expansion of the Federal Reserve's balance sheet, which has been a controversial topic in Washington.

RateWatch said that the national average rate for a money market savings account was unchanged at 0.13%, while the average rates for three-month, six-month, one-year and two-year CDs were all unchanged from last week, at 0.11%, 0.17%, 0.27%, and 0.43%, respectively. The national average rate for a five-year CD with a balance of less than $10,000 was also unchanged, at 0.92%.

RateWatch also said that the highest rate available for a money market savings account with a balance of less than $10,000 was 1.05%, offered by Sallie Mae Bank, followed by a rate of 10% offered by Green Bank, NA , and a rate of 0.95%, offered by Ally Bank.

-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.