Fed paused on latest interest rate, but banks are still raising interest payments.

My bank today offered a 30 days certificate of deposit at 5.4% with only a $500 minimum. Banks have steadily increased interest payments to customers in the United States as the Federal Reserve has raised interest rates.

This is really a big climb from when rates were less than 1% two years ago. The Fed paused on raising its rate this week, but I think there might be one more rate lurking in the background.

The stock market usually has a Santa Claus rally in December and then folks load up mutual funds in January through March in preparation for year end tax filings. The result is normally a strong stock market through spring. Strong stocks may propel companies to continue to hire and expand and that will keep the economy humming for another 6 months. And also, that will keep inflation at the current level or maybe a little tick higher.

So I expect the Fed to hit the rate increase button one more time in the next six months. If I am right, we could see CD rates top the elusive 6%.
We are almost there.

With a few smaller banks like Forbright and NexBank. Forbright is offering a 9 month CD at 5.75%.

People, especially those on a fixed income like retirees, tend to like CDS. The interest is guaranteed and the principal is FDIC insured. That's decent return and security in a simple package.

It's been a long time since CD rates looked enticing to me, but they are nearly there!