Reading the Federal Reserve's Tea Leaves

Reading the Federal Reserve's Tea Leaves

Rate information contained on this page may have changed. Please find latest savings rates.

BestCashCow provides the most comprehensive list of US savings accounts and CDs from online banks as well as from branch-based banks and credit unions.  As such, we tend to get a lot of queries when the Fed raises interest rates, as it did yesterday for only the third time in the last decade.  These queries usually end with something like “why did my bank not raise my rate?”

My response is as follows: Your rate was not raised yesterday, last night or this morning because the rates that banks offer depositors on certificates of deposit, savings accounts and checking accounts are more a function of what the banks are willing to pay.  As the Fed funds rate increase was well projected for months by Janet Yellen – and therefore highly anticipated - the most competitive savings, CD, and checking rates had already risen.  In fact, the best savings and CD rates have actually gone up by more than 25 basis points since the Fed’s last action early last year. 

See the best savings rates here and the best CD rates here.

The Fed funds target rate, set by Janet Yellen and the rest of the Fed’s board of governors is now 0.75% to 1.00%.  Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, dissented on the Fed’s decision to raise the Fed funds rate by 25 basis points, which leads us to believe that there will be only three quarter-point hikes this year, instead of 4.  The pace of rate hikes will be especially slow for retirees, those who are averse to investments in the stock market, and those who otherwise depend on a risk-free rate of return in order to maintain a certain standard of living.

Nevertheless, it is clear that rates will continue to rise significantly, albeit gradually over the next two years.  The Fed is now indicating that the Fed funds rate will be over 3% by 2019, in which case savings and short term CD rates will be at or over that level by then.  The Fed is also projecting that US GDP will flatline at 1.90% in 2018 and 2019; should it move at the 4% pace that Wilbur Ross, the U.S. Secretary of Commerce, desires, the Fed funds rate may actually be much higher.   It will therefore be important over the next two years to track your savings accounts carefully to make sure that you are earning one of the most competitive savings rates.

We should also note that where you will see change right away when the Fed raises short-term interest rates, as it did Wednesday, is in banks' prime lending rates.  Most major banks yesterday evening responded by increasing their prime lending rates to 4.00%, which has an immediate flow-through to credit card rates and auto loan rates.   If you have been considering locking into a HELOC or a new mortgage, you may want to consider doing so before the Fed’s next raise in the summer or fall.

See HELOC rates where you live here.

Compare the best mortgage rates here.


A Moment in Time - Kumbaya

A Moment in Time - Kumbaya

America is in a moment unlike any before.  And it is fueling a strange, albeit fleeting period of emphatically enthusiastic sentiments, simultaneously, in two major and almost always opposing segments of society.

It is hard to think back to a time when most successful white collar and a majority of employed and unemployed blue collar folk were equally excited about the direction of the country.  But, that is exactly what is happening now.

The stock market and the investor class are ecstatic over promised slashing of tax, corporate and market constraints and blue collar workers are mesmerized by promises to bring back 20th century manufacturing jobs and, generally, the good life.  

Both groups are singing Kumbaya in tune.

There is one sector, however, that is not, a combination of government and non-profit workers.  They are traditionally the manpower fueling political and social fabric infrastructure.  But these folks are both powerless and without the volume of white and blue collar Americans.

The singing cannot last. The interests of white and blue are too different.  Much more likely is that neither group will be singing much longer, both shattered by the impossibility that America’s much weakened social fabric – social, political and economic, can sustain current, clashing directions.   As one group begins to see more clearly through the heavy mist of promises, the other will wobble and both will come tumbling down.

Rather than bask in the moment, we all need to come to terms with reality, possibilities and solutions for the larger good.    


Not A Single American Hero

Not A Single American Hero

Throughout the long, ugly election campaign, no one stood up, save Mitt Romney who after the election seriously undercut the singular role he had fashioned.  One can make the case that no one expected Trump to win, including most Republicans.  Why take the risk, turn off your constituency, and diminish yourself before your peers if Trump was going to loose anyway?

But no one realized how much support Trump had from the white working class and from Russia.  And, now we are living the nightmare.  Every day, we are moving closer and closer to a catastrophic failure of our 200 + year experiment with democracy and world leadership.  And, no one has the courage to stand out. 

Yes, the Democrats are out there criticizing everything Trump does.  But that is not courage; that is the role of a powerless congressional minority.  It takes no courage to criticize when you are out of power and when your constituency is demanding that you do so.

Where courage is needed – where true American heroes are needed – is from Trump’s own party and from other respected voices.  And, the silence is deafening.  There is nothing, no one.  A few like Lindsey Graham and John McCain are making occasional noises, but they are posturing far more than standing up and leading. 

And the few others out there, like George W. Bush or Colin Powell or others, are eerily quiet.   Failing a single voice, we need a group, like a Council of US Presidents.  It is almost too late – almost too late to save America and its people from calamity.  I am not someone who generally says the sky is falling and I do not believe that I exaggerate.  But, as a country, we are at a precipice without a strong voice and sage leadership.  We desperately need an American Hero.