Not widely touted, there may be better days ahead via higher interest rates for those with savings in banks, sees Grumpy Editor, following the Federal Reserve raising its key short-term interest rate by a quarter point last Wednesday, citing a brighter economic outlook.
It won’t be soon. But as competition for deposits heats up, banks will have to lift rates as customers seek better deals in parking their cash.
Most banks now pay from zero to about a slim 0.50 percent on savings accounts. Certificates of deposit pay slightly higher rates, depending on the term.
The Fed is on track to make three rate increases this year and three next year. That would place its key rate at around 3.25 percent, compared to the current 1.5 to 1.75 percent. That’s still low by historical standards but it marks the central bank’s fourth rate increase in a year.
"We're trying to take that middle ground" on rate hikes, boosting rates enough to head off an eventual spike in inflation without derailing the economic expansion, Fed Chairman Jerome Powell said at a news conference.
Newspaper advertising departments should welcome the upcoming action because financial institutions will be forced to take out ads promoting their rates.
The three largest U.S. banks --- JP Morgan Chase & Co., Bank of America and Wells Fargo & Co. --- have added more than $2.4 trillion in domestic deposits over the past decade. That’s a 180 percent increase since 2008, according to a Wall Street Journal analysis of regulatory data.
Still, savings account rates, for example, will be well below prior years that saw payouts as high as 18 percent during the Jimmy Carter years and 3 percent going way back to the 1950s.
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