Certificate of deposit rates pulled back further last week, in an economic environment where policymakers are in no rush to raise interest rates, and banks and lenders aren’t in a position to follow suit.
For the week, not a single CD rate category pushed upward. Down at the low end, three-month CD rates fell to 0.42% from 0.44%, while six-month CDs slid to 0.64% from 0.67%.
One-year CDs sunk, as well, to 0.99% from 1.02%, and two-year CDs fell to 1.44% from 1.47%. Four-year models dug a deeper hole, falling to 1.92% from 1.97%, and five-year CDs treaded water at 2.28%.
All updated rates come courtesy of the BankingMyWay Weekly CD Rate Tracker.
These scenarios shouldn’t change any time soon — not as long as the Federal Reserve promises to keep interest rates down. That’s exactly what Fed Chairman Ben Bernanke said this week. Appearing at the Economic Club of New York on Monday, Bernanke told his audience that the Fed was determined to keep rates down as long as it would take until the economy perked up again.
There may be one way out, but it’s not exactly the path of least resistance. The dollar is currently being hammered in global currency markets, marking double-digit declines during the past six months. Typically, lower interest rates put downward pressure on the dollar which, at this time, isn’t viewed as a major danger by economists. In fact, it might even help spur the economy.
Here’s an example: As Bernanke pointed out in his New York speech, commodities like oil and gas are priced in dollars, so they’re cheaper to buy when the dollar is in decline. When consumers and businesses buy more oil, for example, that helps the economy, which is the Federal Reserve’s “big picture” priority right now (dollar be damned). Bernanke, after all, said "we use our interest rate tools to try to meet our mandate — full employment and price stability.”