FOMC Meets This Week, Will Savings Interest Rates Start Moving Higher?

The Federal Open Market Committee is having their two day meeting today and tomorrow to decide economic policy. The big question is will their policy decisions for interest rates higher in 2014? The answer to that question is yes and no, some interest rates will move higher this year while other rates will remain near current levels.

The FOMC is expected to announce another reduction of asset purchases, staying the course on reducing purchases, and eventually ending them this year.  The FOMC has reduced their purchases of mortgage-backed securities and long term bond yields from $85 billion a month in 2013, down to $55 billion a month in April. The FOMC will probably announce another $10 billion monthly reduction, bringing the monthly purchases down to $45 billion a month staring in May.

This action will eventually force mortgage rates higher as long term bond yields start to rise. Predictions are for 30 year conforming mortgage rates to increase to 5.00 percent by the end of the year. 15 year mortgage rates will increase to around 4.00 percent. If you're thinking about buying a home this year now would be a good time to start the proces. Both mortgage rates and home prices are expected to move higher in the coming years.

While the FOMC's actions this year will force mortgage rates and other loan rates higher, the same can't be said for deposit rates. Banks and credit unions won't increase deposit rates until the federal funds rate is increased. The FOMC sets the fed funds rate and has kept the rate in a targeted range of zero percent to one quarter percent since December 2008.

In economic forecasts released by the FOMC the majority of FOMC participants don't feel there will be a need to increase the Fed funds rate until sometime in 2015. The FOMC"s policy will keep deposit rates near current levels until the summer or fall of next year. These predictions could of course change if the unemployment rate falls faster or if inflation rises above 2.00 percent.

Savings rates, CD rates and money market rates are moving higher in the coming years. Therefore you should stay invested in shorter term certificates of deposit or variable interest rate accounts. Listed below are banks that are offering the best savings rates and money market rates this week.

Best Savings Rates

1. GE Capital Retail Bank Optimizer Plus 0.95%
2. CIT Bank 0.95%
3. GE Capital Bank 0.90%
4. Barclays 0.90%
5. The Palladian Private Bank 0.90%
6. Ally Bank 0.87%
7. Colorado Federal Savings Bank 0.85%
8. Discover Bank 0.85%
9. FNBO Direct 0.85%
10. American Express Bank 0.80%

Best Money Market Account Rates

1. Sallie Mae 0.90%
2. Union Federal Savings Bank 0.90%
3. Ever Bank 0.86%
4. Ally Bank 0.85%
5. Mutual of Omaha Bank 0.85%
6. First Internet Bank of Indiana 0.80%
7. Able Banking, a division of Northeast Bank 0.80%
8. Bank of Internet USA 0.75%
9. Discover Bank 0.70%
10. Virtual Bank 0.65%