When Will Cd Rates Go Up?
Unraveling some of the critical factors that drive Bank CD rates in the near term and how to make real profits from knowing when CD rates will go up.
When attempting to determine when CD rates will go up in the near term and how to benefit from this expected rise, there are several critical factors that should be examined and understood. The factors to be examined include: the overall level of interest rates, the general level of the economy, and the relative position of the banks from which the CDs are to be purchased. Once these factors have been considered, it is then possible to draw meaningful conclusions about CD rates and to position oneself to reap the rewards.
Interest Rates
While predicting the level of future interest rates is the business of many investment professionals, the layman can get a good sense of where things are headed by both looking at the level of fed fund futures and reading the most recently statement issued by the FOMC. The level of fed fund futures indicates where professionals believe interest rates will move, while the FOMC statement contains forward-looking statements made by the Federal Reserve as to their current intentions vis-à-vis interest rates. These will provide a good indication as to what direction rates are headed: as rates rise, CD rates will go up.
Economic Health
Looking at key economic indicators like unemployment and consumer confidence will provide good insight: when the economy is stable, more borrowing occurs, banks require more capital, and thus are more willing to push CD rates go up.
The Specific Bank
The healthier a given bank, the less likely it is pay high rates – it more easily can attract capital. To benefit from these factors, determine when rates are expected to move, and be sure capital is not locked at lower rates and can be deployed when CD rates go up.
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