National certificate of deposit rates held steady last week, as some upward momentum from rising Treasury rates offset low demand for bank CDs from investors.
It’s a bit of a holding pattern, as bank rate watchers mull over some of the early March economic numbers. Good news came in the form of higher auto sales and reports from Federal Express (Stock quote: FDX) and the American Railroad Association that businesses are shipping more products these days, a welcome sign that the economy may be picking up steam again.
More room for optimism comes from Morningstar economist Bob Johnson, who bumped up his gross domestic product forecast this week from 4% for the first quarter of 2010 to 4.5%. Most economists expect GDP to rise by about 3% for the period.
If the economy does grow by 4.5% for the quarter, it might put those “double-dip recession” rumors to bed.
Driving the economy forward, and hopefully driving bank rates higher, is stronger consumer spending, which could clock in at a 3% growth rate for the first quarter of 2010, according to Morningstar’s Johnson. He also expects the job market to pick up, adding 100,000 new jobs to the employment number in March. If the employment number picks up, that could be the sign the Federal Reserve needs to raise interest rates. That inflation-fighting move would drive CD rates even higher.
Johnson paints a rosier picture than we’ve seen from most economists so far this year, but bit-by-bit, the economic numbers he cites would fuel economic momentum and boost CD rates.