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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.

Rates on savings accounts and certificates of deposit could be facing their first significant drop in three years.
Rates on savings accounts and certificates of deposit could be facing their first significant drop in three years.   (Index Open)
Locking in a CD is particularly attractive now, said Greg McBride, senior analyst at Bankrate.com in North Palm Beach, Fla. The yields haven't yet reflected the idea of a Fed rate cut.
"Locking in a CD is particularly attractive now," said Greg McBride, senior analyst at Bankrate.com in North Palm Beach, Fla. "The yields haven't yet reflected the idea of a Fed rate cut."   (Index Open)
Many older Americans, in particular, live at least partly off the interest of their savings. Experts are recommending locking in a long-term CD in case those rates begin to slide.
Many older Americans, in particular, live at least partly off the interest of their savings. Experts are recommending locking in a long-term CD in case those rates begin to slide.   (Shutterstock.com)
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US • Money

 
Federal Reserve • credit market • interest rate • federal fund rates • savings account • certificates of deposit

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