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CD Rates, Money Market Rates Should Rise in 2010 and 2011, According to Philly Federal Reserve President

Posted by: RateAPY Bank Rates News
December 2nd, 2009

In speaking to the 31st annual Economic Outlook Seminar in New York yesterday, Philadelphia Federal Reserve President Charles Plosser said that real GDP growth should be 3% in 2010 and 2011. Plosser indicated that this “will cause real interest rates to rise, which would call for the Federal Funds Rate to rise as well.”

Interest on Certificates of Deposit and Money Market Accounts Should Rise with Fed Funds Rate

This statement gives insight into where the Federal Reserve is heading with US monetary policy. Because the Federal Reserve needs to “begin withdrawing the enormous amounts of liquidity it has pumped into the markets,” as Plosser put it, interest rates are almost sure to rise in the next two years. The interest you earn in your savings account is related to what the Federal Reserve does with its Fed Funds Rate. As the Fed Funds Rate rises, you can expect higher yields on your certificates of deposit and money market accounts.