Once again, the Federal Reserve has raised interest rates, the third time it has done so this year. Though no one can reliably predict how often the Fed will make increases, smart CD savers will note the Fed’s calendar.
The Fed’s rate-making body is called the Federal Open Market Committee, or FOMC, and it meets on a publicly announced schedule of every 6-8 weeks (google “FOMC calendar” for the dates). Upon the conclusion of each meeting, the committee announces its rate decision to the press
The reason this matters to CD savers is because an increase by the Fed generally ripples out to increases by banks and credit unions on their savings and CD accounts. While it won’t happen instantly, the general deposits market will move upwards.
If you have a savings or money market account, you won’t need to do anything to benefit from increases your institution makes. But with CDs, the calculus is different, since you’ll be locking in one rate for the duration of the CD’s term.
That’s why it’s smart to check the FOMC calendar to avoid locking into a new certificate right before a possible rate hike, sticking you with a lower rate than you might be able to earn if you hold of until the next FOMC decision.
From December 2008 until December 2015, the FOMC held its rate to near zero to stimulate an economic recovery after the financial crisis, and bank deposit rates tanked to historic lows. Since then, the Fed has raised rates once per year in 2015 and 2016, and now three times each in 2017 and 2018.
It’s always uncertain what the committee will decide at its future meetings, but the savvy saver knows it’s better to lock in new CD rates after, and never before, a Fed rate hike.