Fed Declines to Increase Rates, December Hike Likely

Despite comments in late August by Fed Chair, Janet Yellen, and NY Fed President, William Dudley, regarding a September rate hike, it didn't happen. The FOMC wrapped up their meeting yesterday and decided to leave the fed funds rate unchanged.

The FOMC did telegraph one rate hike in 2016 which will likely come during the Fed's December meeting, after the election. A likely 0.25 percent rate hike in December would put the fed funds rate in a range of 0.50 percent to 0.75 percent.

A 0.25 percent increase is not enough to entice banks to increase deposit rates. As we have reported for the past many years, any large increases in savings rates or money market rates will have to wait until the Fed makes a more significant increase to the fed fund rate.

Currently, the best savings rate in our database is at 1.25 percent with a yield of 1.26 percent from Popular Direct. A 1.25 percent savings rate is on par with the highest 1 year CD rate in our database currently at 1.30 percent. The highest MMA yield in our database is a promotional rate from EverBank at 1.11 percent.

Author: Brian McKay
September 24th, 2016

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