There go interest rates on CDs and savings accounts. Great for borrowers, terrible for savers.
There go interest rates on CDs and savings accounts. Great for borrowers, terrible for savers.
As of 3/16 there are two local banks paying 1.96% and 2.11% fixed rates on a 5-year CD. I don't see any nationally available rate higher than Marcus (Goldman Sachs) 1.9%.
If a person has savings to set aside for 5 years, I think it would be worth considering Treasury I Bonds, limited to $10,000maximum purchase per year, per social security number. Through April 30, I Bonds pay 0.2% "fixed rate" (real yield). The fixed rate will be reset for bonds bought May 1 … quite possibly reduced to zero. In addition to the fixed rate, I Bonds pay an "inflation-adjusted rate" (based on the CPI-U). The compounding return on the I Bond would depend on the inflation in future years.
If over the coming 5 years,
inflation averages 1.5%; the I Bond would pay 1.7% total rate.
2.0% average inflation; I Bond total rate 2.2%
2.5%; 2.7%
3.0%; 3.2%.
If the best available CD rate is 1.9% (fixed), the currently available I Bond will pay more in total rate any year when the CPI-U is greater than 1.7%. (The CPI-U from Feb 2019 to Feb 2020 was 2.3%)
I agree, the zero interest rate policy is not of much value to savers... it sticks savers with a negative real return on their savings, after inflation is taken into consideration.
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