The Federal Reserve recently cut the Federal Funds Rate by 1/2 a percent, from 5.25% to 4.75%. This rate is the rate at which banks charge each other for overnight loans.
Banks will now in turn lower their prime rate, which is the best rate that they offer on loans to their customers.
This means a couple of things for investors:
- Interest rates on loans (mortgage loans/home loans, auto loans/car loans, personal loans) will drop so this is good for people that need a loan.
- Interest rates on savings, online savings, and CDs will drop.
If you locked in a CD at one of the higher rates in the past few months then you did great! Hopefully you put in a good amount that will make you more money than you can make at today’s current rates.
If you are looking to invest in CDs then you should still consider a short CD at this time. There’s no way to tell if the Fed will drop rates further in the near future.
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February 14 2008
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