For conservative investors who are patiently or not so patiently awaiting news of higher CD rates, the news to watch for in the new year of 2010 will be good economic reports regarding jobs, housing, and GDP growth.
The awful economic conditions of the last two years have been the cause of the Federal Reserve keeping the fed funds rate at historic lows. This key short-term interest rate, in turn, has kept CD rates historically low.
As 2010 gets going, it may be time to let interest rates rise a bit…if the economic reports show that the economy is improving.
In terms of jobs reports, the Non-Farm Payrolls Report is the star of the show. If employment starts to pick up according to those numbers, inflation will become an instant worry. That could lead to an interest rate hike.
Housing, as noted by Richard Barrington, is the other giant elephant in the room. Sales of new homes came in lower than expected this week, and that drove the value of the dollar lower through the implication that the economic recovery isn’t yet as robust as desired.
GDP growth is the third bit of news that CD holders should be aware of. If fourth quarter GDP growth comes in at 4 percent or more, the fed funds rate–and your CD rates with them–could be headed higher sooner rather than later.
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