After the Federal Reserve announced the lowering of the discount rate yesterday morning most economists believe that a quarter point cut in the Federal Funds rate is highly likely in the FOMC's September monetary policy meeting. As I mentioned in this previous article, banks have recently been keeping long-term CD rates low in anticipation of lower interest rates in the future. 
Many banks have had higher short-term CD rates than long-term CD rates because they understand that when those 3 or 6 month CD's come due, the rate will likely be lower. The banks have simply been predicting what economists are now expecting from the Federal Reserve.
The savvy CD investor who is looking to get the best rate of return for their money will now be looking for longer term CD's with the best yields. As soon as the Federal Reserve lowers the interest rates, banks will be quick to lower CD rates, so it would likely be wise to lock in those rates before there is an interest rate move.
Certificates of Deposit are very safe ways to return a pretty good amount of money. I believe that CD's are a good tool to use in tandem with stocks and mutual funds, with CD's holding up your portfolio in down markets. Think ahead of the curve when interest rates are about to go down, if you have been considering a CD as an investment vehicle of choice for you, lock it in soon!
» CD rates begin to drop, likely to fall farther from GrowYourFunds
After the Federal Reserve moved to lower interest rates by 50 basis points on Tuesday, banks around the country began to lower the rates on their Certificates of Deposit as expected. Last month GrowYourFunds urged readers to lock in those... [Read More]
Tracked on: September 22, 2007 10:44 PM | Permalink to Trackback