The Federal Reserve Keeps Rates at 0%

by CD Rates on June 23, 2010 · 0 comments

in News

The Federal Reserve released a press release today from it’s FOMC meeting.  The press release reiterated what has been previously said “exceptionally low levels of the federal funds rate for an extended period.” In plain English, this means CD interest rates will continue to remain lower than normal for the foreseeable future.  This basically forces investors to put cash into other riskier assets, such as stocks, which is something the FED wants on purpose.

The main question from today’s press release, is how long is an “extended period”?  Is it 6 months or 5 years?  What should someone looking to invest in fixed income investments to do?  Many investor advisers are recommending, keep your investments short term (3 years and under) so not to be caught when interest rates do rise.  Look to either invest in shorter term CDs, or find CDs that have short (under 90 day) withdrawal penalties.  If staying with long term fixed income investments, you could wind up with real negative returns (when including inflation) when interest rates rise.  If you believe rates will continue to remain low for many years, like Japan, it may make sense to invest in longer term CD rates. All of this does not make it easy for the average CD investor.

Search our web site to find the best CD rates either nationally or within your local area.


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