High CD Rates 2011
What the high CD rates 2011 will be are nothing compared to the past, due to the way the US Federal Reserve has kept the PRIME rate artificially low in hopes it would spur the economic recovery. The fault with this approach was that it involved the private financial system doing its part.
That part of the private sector was to start releasing funds for investment in business and in the form of private loans to individuals. What has occurred instead was for the officers of the many financial institutions to take the huge profits they have earned and give themselves bonuses. This has kept the funds in the hands of very few people. The results are a stalled economy with just one main sector making huge profits.
When The FED finally decides to raise interest rates, the CD rates will rise and the wealth of the nation will increase. The argument against this approach is that this will make banks tighten their belts and for them to give out fewer loans. Since this portion is already occurring, higher interest rates should happen but the administration’s reluctance to act appropriately has hurt the average American investor to the point that the economy cannot recover.
There are a few CDs with rates over 3.00% APY on 5 year terms but they are becoming rarer and rarer. There are a few local institutions that are offering 6 month CDs with an APY of around 1.00% to attract new customers, but they are very small in number.
As an example of the larger financial institutions, Wells Fargo has a one year CD that is earning an APY of 0.15%. They are making their profits in fees being charged to the American consumer instead of making loans like they promised when they received the bail out money.
The high CD rates 2011 will likely be under 4.00% APY on long term CDs. Until the federal government makes the larger financial institutions to loosen their belts, higher rates will not occur