Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Banks Keeping a Lid on CD Yields Long-Suffering Savers Await Better CD Returns after Fed's December Rate Hike

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Banks Keeping a Lid on CD Yields Long-Suffering Savers Await Better CD Returns after Fed's December Rate Hike

Article excerpt

Savers lulled to sleep in recent years by near-zero returns on CDs might have reason to crack open an eyelid sometime next year.

Even though the Federal Reserve raised short-term interest rates a notch in December, relatively few banks passed along any benefit to consumers by boosting deposit rates, according to Greg McBride, senior financial analyst with interest rate tracker Bankrate.com in North Palm Beach, Florida. The Fed's quarter-point increase was the first rate hike in nearly a decade.

"Banks are sitting on a pile of deposits. That's the factor that is going to keep a lid on yields even in an environment where the Fed is actively raising rates," Mr. McBride said.

Yields on six-month certificates of deposit averaged 0.17 percent nationwide last week compared with 0.16 percent a year earlier, according to Bankrate.com. At the same time, yields on one-year certificates averaged 0.28 percent vs. 0.27 percent a year ago, and yields on five year certificates averaged 0.83 percent vs. 0.89 percent.

By comparison, savers were earning an average of 3.77 percent on one-year CDs and 4.02 percent on five-year certificates in August 2007 - the peak just before the last recession triggered a relentless slide in rates.

CD rates have remained near historic lows locally, too.

The top 10 retail banks in the Pittsburgh region were paying an average of 0.15 percent on one-year certificates last week, according to a Pittsburgh Post-Gazette survey. That's essentially unchanged from 0.14 percent nearly two years earlier.

The outlook for more Fed rate hikes is mixed, with some economists expecting the central bank to hold off on another quarter-point increase until after the November elections. Others are projecting two quarter-point hikes this year, with the first one coming this summer.

But any real relief for savers appears to be on the distant horizon.

"We think rates will move up slowly, but surely, over the second half of the year and next year and maybe actually will add up to some real money [for savers] by 2017 or 2018," said Stuart Hoffman, chief economist for PNC Financial Services Group in Pittsburgh. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.