Savings Account Rates

Savings Account rates, certificate of deposit accounts and mortgage rates have been coming down the past year because the economy is contracting and there are government programs that are designed to get the economy going by lowering rates.

The U.S. Treasury Department has also been lending billions of dollars to  large and small financial instituions with the Troubled Asset Relief Program (TARP).

Interest rates are lower because of TARP.  Savings rates have been going down because institutions a cheaper source of funds from which they can borrow from. There has been less promotional deposit offers from banks because they have less of a need for deposit funds.

The Federal Reserve has also been forcing interest rates down.  The Fed has kept the Fed Funds rate at a target range of 0 percent to .25 percent since the fourth quarter of 2008 to get the credit markets and the economy going again.

The Feds have also been printing money to buy large quantities of mortgage backed securities to drive mortgage rates down.  Lower mortgage rates also mean lower interest rates on deposits.

Rates on savings accounts will stay low until the Feds start raising interest rates which will probably happen in early 2010. When the economy starts to recover the Feds will have to start raising the Fed Funds rate to keep a lid on inflation. This is will drive rates on savings accounts higher.