Are rates headed down soon?

[disneysteve]

I've seen a few articles recently suggesting that now is the time to lock in CD rates as we're probably at the peak. Then in Sunday's paper, I saw a bank ad that was paying more on their 6-month CD's than they are on their 12-month CD's. That seemed like an ominous sign.

[sweeps]

I wouldn't bet against it. Actually bonds might be a good investment for the next 2 or 3 years.

[Bookie]

Interesting that you should ask because I was reading a piece on exactly the rate inequity you describe. Discussion here.

Smart money seems to expect a decline in rates next year. The tug of war between recession and inflation seems to favor a looser money policy.

[zabbkoff]

And here's a CNN link on the subject as well.

Guess the next year or so is anyone's guess.....

[tmango]

I can say with 100% certainty that they either are going down or are not going down.

[disneysteve]

Originally Posted by tmango

I can say with 100% certainty that they either are going down or are not going down.

As they say, economists have accurately predicted 9 of the last 5 recessions.

[TBH]

Originally Posted by tmango

I can say with 100% certainty that they either are going down or are not going down.

Augh! This sounds exactly like something my partner would say.

[tmango]

Originally Posted by claire

Augh! This sounds exactly like something my partner would say.

Sorry couldnt resist. In truth I think they will go down, but then I've thought that all my life.. i guess i am a financial pessimist

[sweeps]

Bernanke: Interest rate cuts unlikely

[JBinKC]

It really depends upon how much Bernanke values the depreciation of the real estate market vs the strength of the dollar in his decision making. I don't really envy the position he is in as he is just trying to minimize the pain of our bloated personal and government debt.

[ren]

Originally Posted by JBinKC

It really depends upon how much Bernanke values the depreciation of the real estate market vs the strength of the dollar in his decision making. I don't really envy the position he is in as he is just trying to minimize the pain of our bloated personal and government debt.

You know, with the Dollar being at a 14 year low against the Pound and a 20 (?) month low against the Euro, it would be pretty risky to lower rates now. China's pegged the Yuan to the dollar, so they would not be amused if we kill the dollar to reinflate the housing bubble. Additionally, I think I heard that France and England are both major holders of US treasury notes; if rates drop again on a dollar that is losing value, they may dump their holdings and really accelerate the process.

Not good. Not good at all. I do not envy Mr. Bernanke his job.

[kimiko]

GMAC drops their rate to 5.25% APY, although my account is still showing 5.3

[disneysteve]

There are a couple of different articles in Kiplinger's this month discussing rate cuts in 2007 and they seem to think it is pretty certain. The articles talk about how to invest your cash, when to lock in with long term CDs, the expectation that the rate curve will normalize, etc.

[Bookie]

And here's a different perspective on the direction of rates. This article argues that there will be competition for deposits and rising rates to attract savings.

You pays your money and you takes your choice.

[disneysteve]

Originally Posted by Bookie

And here's a different perspective on the direction of rates.

Actually, that article doesn't really say anything that different:

"But he does expect that, during the next year, longer term CDs will start paying better rates than shorter-term CDs."

"It's anticipated that the Fed has probably stopped raising rates, and that the next move will be a decrease. But we don't know if that will be in two months or 12 months."

So the conclusion in that article seems to also be that the inverted yield curve will return to normal and that the next rate change will be downward.

[sweeps]

Meanwhile.... European Central Bank boosts rate

[frugal saver]

I keep track of CD rates on a spreadsheet, and from mid-September to now, several banks have lowered rates (Fireside from 5.48 to 5.12, for example) on one-year CD's and I'm seeing long CD's--three to five years--with much lower rates than 1 year.

I keep most of my CD money in one-year CD's and am really wondering if I should try to lock in longer rates now, (through 2007, as they become due), or just wait?

Any advice?