In the wake of the Federal Reserve's latest series of interest rate increases, savers are now seeing more attractive returns on certificates of deposit (CDs). As financial institutions adjust to the Fed's monetary policy, Forbright Bank has emerged with a competitive offer, presenting a nine-month CD at an annual percentage yield (APY) of 5.75%, requiring a minimum deposit of $1,000. Meanwhile, Popular Direct is offering a one-year CD with a slightly lower APY of 5.67%, but with a higher entry threshold, necessitating a $10,000 minimum deposit.
The Federal Reserve, which paused its rate hikes on November 1, is scheduled to review its interest rate policy again on December 13. This pause follows an aggressive stretch beginning in March 2022 that saw eleven rate hikes aimed at tempering inflation. The halt in rate increases has provided an opportunity for banks and credit unions to attract depositors with higher-yielding CDs.
Financial institutions like Barclays Bank and member-focused entities such as Alliant Credit Union often outpace their competitors by offering better rates. This advantage is attributed to their lower operational costs and policies that prioritize member benefits, such as profit sharing. CDs are known for their fixed returns and are bound by early withdrawal penalties, positioning them as a suitable option for savers with medium-term financial goals rather than those requiring immediate liquidity. Credit unions also offer share certificates that operate comparably to CDs but yield dividends instead of interest.
Investors seeking to lock in returns amid the current economic landscape may find these CD offerings particularly appealing as they balance the quest for higher yields against potential future rate adjustments by the Fed.
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