March 27, 2009 Update
Rates on savings accounts, money markets and certificates of deposit continued to drop this week, although at the slowest pace since the financial crisis began. The average savings rate, as tracked by the BestCashCow rate table, only fell by 3 basis points from 2.84% APYto 2.81% APY, the smallest decline in seven weeks. Likewise, CD rates fell by small amounts and five year CD rates didn't fall at all, staying firm at an average rate of 3.43% APY.
The spread between savings and money market rates and 3 year CD rates also stayed the same from last week at .73. The spread has increased substantially over the last couple of months as short term deposit accounts (savings, money markets, 3 month - 1 year CDs) have come down much faster than longer-term CDs. The spread had narrowed to .14 in late January.
For depositors, it means you are being compensated more for locking up your money longer. But with talk of inflation, the Fed printing dollars, a stock market bounce (perhaps a bear market bounce at that), and positive durable goods and existing home sales reports, the probabilities seem to favor rates and inflation being higher in a year than they are today.
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