RateAPY

How To Predict What Interest Rates Will Do

Posted by: RateAPY Bank Rates News
March 10th, 2010

About every six weeks the Federal Reserve’s Federal Open Market Committee (FOMC) gets together to decide if they should change the Fed Funds Target Rate. If you want to know whether your certificates of deposit will be paying more in the near future, one way to check is to watch Fed Funds Futures. Futures traders will be making bets on what the FOMC will do at their next meeting. These predictions are most accurate the closer they are to the date of the meeting.

Interest Rate Prediction: Follow the Futures

By paying attention to Fed Funds Futures, you can predict where interest rates on everything from mortgages to savings accounts and money market accounts may be headed. When you deposit your money into a savings account or money market account, you are making the bank a loan. The bank is only going to pay you the going interest rate. A bank will not pay you more to borrow your money than it would pay another bank based on the Fed Funds Rate.