WILL INTEREST RATES GO UP SOON IN 2010?
For people that have savings, one of the biggest questions they have is where to put their money to get the best interest rates? Many folks right now are leery of the stock market and don’t want to add more money to it. In fact, many might be reducing their stock positions just to feel safer. These people want to find the place where they can make the most interest with the least risk.
Of course interest rates are lower than they have been in decades and getting 1% or less is insulting but that is the reality right now. The Federal Reserve has manipulated interest rates down to this low level where they have been for quite some time now. It is really just another form of government redistribution of wealth if you ask me. These low rates only hurt those with money and retirees that depend on interest income to live.
If you are struggling with where to park your money right now there are not really any options that will pay more interest. Treasury bills pay a laughably low rate and you can get a higher rate by getting a 30 year bank certificate of deposit but is that really smart? With rates so low it doesn’t seem smart to tie your money up for very long as rates can pretty much only go up from here. So, you have to decide how comfortable you are with locking up your money in a CD and how long a time period is best. Or you can choose a money market account and get a reasonable rate with total liquidity at any time in case rates do get better.
Interest rates can’t go much lower and so it is reasonable to assume we are pretty much at a bottom here. That means rates will go up but we have no way of knowing when. With Obama in power and redistribution of wealth always popular with Democrats, it seems rates may stay low for another 2 or 3 years. I know many people believe the Fed is independent but is it really? Obama doesn’t like “rich” people and he defines them as those who make over$250,000 a year. Well, with inflation that number is not anything like what it used to be.
If you do have money to invest or park, the best money market interest rates are not much lower than CD rates at the highest deposit levels. The more you have to invest, the higher interest rate you will get with a MMA and it gives you the ability to withdraw at any time with no penalty. Right now, they might be your smartest option.
