The average rate paid on 5-year certificates of deposit (CD) rose a bit last week — after two months of stagnation – according to RateWatch. Is there hope for savers?
RateWatch said that its weekly survey discovered that the average APY paid on 5-year CDs across the country rose from 1.14% to 1.15%. However, rates on shorter-term CDs stayed the same.
The reason for the move on 5-year CDs – and not on 1-year or 6-month CDs – has to do with recent signals sent by the Federal Reserve. While the Fed has basically pledged to maintain its low-rate regime for the near term, it has signaled that it might raise its benchmark interest rate in the first half of 2015.
Anticipating this, financial institutions are trying to “lock in” more long-term funds from depositors.
As you can see, though, the move in rates is tiny, and the overall picture pretty much stays the same: savers who want secure, insured investments are stuck with sub-2% yields for the foreseeable future.
Until the Fed signals a more dramatic move on rates, things will continue in this fashion. Savers who want a good return on their money will opt for riskier investment options, such as stocks.
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