Fed Could Take Credit Crunch Fix to the Bank

Interest rates may drop, but deposit rates could go with them
By Wesley Oliver,  Newser Staff
Posted Sep 3, 2007 4:00 PM CDT
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(Newser) – If you have CDs or a savings account, you may be contributing, soon enough, to the solution to the credit market upheaval, the LA Times reports. Some investors expect the Federal Reserve to cut short-term interest rates next month, a move that could inspire banks to raise money elsewhere by dropping deposit rates for the first time in more than 3 years.

“Banks are not going to do much lending without a reduction in their cost of funds,” says an economist. Whatever happens, experts are advising savers to act now: “Locking in a CD is particularly attractive,” says one banking analyst. Americans have more than $5 trillion in savings accounts and CDs, and rates have held steady at 4.17% for a year.