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Thread: Interest rates

  1. #1
    Senior Member
    Join Date
    Feb 2011
    Posts
    256

    Interest rates

    There go interest rates on CDs and savings accounts. Great for borrowers, terrible for savers.

  2. #2
    Senior Member
    Join Date
    Dec 2010
    Location
    Price County, WI
    Posts
    1,158
    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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