Certificate of deposit rates continue their slide this week, the financial equivalent of a death march for weary bank interest rate investors.
We have the exact numbers below, as measured by the BankingMyWay Weekly CD Rate Tracker, but the reasons for the slow-motion cliff dive for CD rates remain pretty much the same — with a potentially frightening new ingredient tossed into the pot from the Federal Reserve.
The latter data point comes from the Royal Bank of Scotland (Stock Quote: RBS) in two spots, via its U.S. Weekly Economic Update for June 21, and also through a separate June letter to investors from chief economist Andrew Roberts.
First, it looks a lot like the global recession, which was supposed to be herded out the door by global economic policy makers, is back lurking on the doorstep. A big reason why is that the key indicators pointing to a recession, especially the absence of inflation, are back on the table.
Says the RBS in last week’s update: "'Dis-inflation' remained the theme in the May inflation release. Consumer price inflation dipped to 2% y/y in May, from 2.2% in April, maintaining the downward trend that started in January. Volatile movements in energy prices were behind the change — they were almost 15% higher than last year — whilst core CPI, which excludes energy, was just 0.9%, highlighting that deflation (outright declines in consumer prices) remains a real risk if the pace of the recovery slackens."
More threatening is the outlook from RBS’s Roberts, who told his clients last week that a steep fall back into recession might be imminent.
Writes Roberts: “We cannot stress enough how strongly we believe that a cliff-edge may be around the corner, for the global banking system (particularly in Europe) and for the global economy. Think the unthinkable.”
Roberts predicts that the Federal Reserve will have to open up one of its last powerful weapons against the specter of a deep recession — its printing press. He says that the Fed will have to pull the lever on “monster” quantitative easing, i.e. flooding the economy with U.S. dollars, to thwart a global economic downturn.