CD Rate Trends This Week: Sept. 8

Bank rate watchers couldn’t have been too happy about the latest economic numbers rolling out last week, and how those numbers may weigh down bank savings rates going forward.

Once again, certificate of deposit rates dropped down the line, from the five-year CD to the three-month CD. No doubt that the two most important pieces of economic news last week came up snake eyes for the U.S. economy.

The latest unemployment numbers showed the jobless rate rising from 9.5% in July to 9.6% in August. That’s never a good sign for bank rates, as higher unemployment tends to weigh down economic growth, keeping bank savings rates low in the process. With so much economic uncertainty out there, bank deposits become highly popular with investors, and with heightened demand comes lower bank rates. After all, why would banks hike CD rates with so many investors throwing money at them?

But another big red flag is the most recent numbers on non-manufacturing growth from the Institute for Supply Management. This week’s data show the ISM’s key index hitting 51.5% in August, down from 54.3% in July. That’s dangerously close to the 50% fault line that the ISM splits between contraction and growth. Consequently, any weakening in the service sector reflects poorly on economic growth, which will also hurt bank deposit rates.

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