Will interest rates on bank CD's go up or down during 2007?

Answer 1

Predicting the future is art not science. It looks like the Federal Reserve Bank will maintain short term interest rates at the current level. If so, the CD rates will not move much from where they are, right now.

Answer 2

The majority of people will tell you that the Fed will cut rates in 2007 because the economy is slowing down and the Fed will cut rates to stimulate the economy.

First, most people haven't the first clue what really takes place. The Fed has 2 tools it uses to stimulate or constrain the economy. Interest rates is 1 of the 2, but the minor of the two. The major tool the Fed uses is its Open Market Operations, ie, adding or removing liquidity from excess banking reserves. Open Market Operations effects availability of money, interest rates effect the cost of money. So if people are touting interest rates - they are only getting a small part of the picture.

Will the fed raise, cut or leave unchanged interest rates in 2007? Good question, alas, who knows. The people that argue for a rate cut are not looking at the other side of the coin. The dollar has been in free fall against the major world currencies. The dollar is on the verge (literally) of a collapse. To prevent that, the Fed would need to raise interest rates. But, if they raise interest rates, they'll further damage the housing market and cause the economy to further contract. They could add more liquidity to the economy via Open Market Operations, but that's inflationary and if Bernanke is the hawk he claims to be, he'll have to raise interest rates.

So, what does he do? Does he raise rates to save the dollar and kill the U.S. housing market which will take the U.S. economy with it, or does he lower rates to save the housing market, but allow the dollar to implode? He's in a real pickle. Leaving rates unchanged will IMHO cause both to occur. The dollar has sold off when the Fed didn't raise rates the last couple of times and the housing market is still falling apart with rates steady.

To make a long story short, no one really knows, but I wanted to give you a bit of info on interest rates so you'll kind of know what to expect. My opinion is that the Fed will try to save the dollar and raise interest rates. A dollar collapse would be vastly more catastrophic than a real estate collapse in the U.S.

Answer 3

The FED is expected to cut rates staring in the first quarter of next year. Whenm that happens, bank CD rates will drop. Keep an eye on www.bankrate.com for more information.

Answer 4

The fructuation of interest rates really depends on various factors - including political and economy, etc.

Look at Thailand for instance, major decisions made a complete U-Turn in less than 24 hours.

Answer 5

I predict up, but I am terrible at predicting the FED decisions so you may want assume the rates will go down.

Answer 6

likely stay near same but just avoid them & invest & won't have to worry. You still will lose purchasing power after taxes & inflation in a cd as you always do.