Vittorio Hernandez – AHN News
Washington, D.C., United States (AHN) – The U.S. Federal Reserve promised on Tuesday that it would hold interest rates at record lows for at least two years. The Fed had held on to the record-low key lending rate since December 2008 to help boost the American economy.
The decision was based on a 7-3 vote, which was the first time in 20 years that three Fed members dissented. The three members who dissented were Federal Reserve Bank of Dallas President Richard Fisher, Federal Reserve Bank of Minneapolis President Narayana Kocherlakota and Federal Reserve Bank of Philadelphia President Charles Plosser.
Besides holding the interest rate until the middle of 2013, the Fed said it would consider additional measures to support the weak American economy, worsened by Standard & Poor’s downgrade of the country’s credit rating last week to AA+ due to the impasse on the debt limit issue.
The stock market, which dipped following the S&P downgrade, made a dramatic rebound on Tuesday after the Fed announcement. The Dow
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The Federal Open Market Committee is still pledging to keep interest rates at exceptionally low levels for an extended period, but focusing in the meantime on removing excess liquidity. Unwinding liquidity programs put into place during the worst of the credit crunch will be a prelude to an eventual interest rate hike — which still appears many months away.
And when rates do rise, it appears we’ll be watching and referring to a different rate. Instead of the federal funds rate — the target rate for what banks pay to borrow from each other overnight — the Fed now has the ability to pay interest on the reserves banks hold at the Fed. This appears to be the new metric the Fed will use to raise interest rates.
Why the switch? A couple of points jump out.
The interest rate paid on Federal Reserve balances is one that will be under the direct control of the FOMC, rather than just setting a target as is the case with the federal funds rate.
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Mortgage rates and Treasury rates increased this past week while CD interest rates, savings account rates and credit card rates moved lower. Though, the results for Treasury and mortgage rates moved in opposite direction to bank savings rates and CD rates, the rate reduction for bank savings rates and CD rates was almost insignificant and the mortgage rate increases were quite soft.
The U.S. debt ceiling debate continues to drive the stock market but interest rates are moving to the beat of a different drummer. While the U.S. cl
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The top CD interest rates available nationally barely budged over the past week. The highest CD rates moved lower on the week but by the smallest of increments and remain in a very tight range. The Selectcdrates.com index of the top ten CD rates for three month CDs, six month CDs, one year CDs, two year CDs and five year CDs was lower by a meager 1/1000ths of a percent for the week. The CD rate index dipped to 1.355 percent on Friday July 15, 2011 from 1.356 percent in the previous week.
While the overall national CD rate average for the best CD rates was mostly unchanged, the banks that are offering the highest CD rates in each CD term category did move about over that past week.
The best three month CD rate was a laggard regarding rate activity and continued to be offered by the same bank this week. AloStar Bank of Commerce or the old Nexity Bank which the bank was known as prior to the FDIC seizure still leads in the three month CD rate category. AloStar Bank of Commerce promotes a three month CD that has an interest rate of 0.81 percent, unchanged from the previous week.
The highest six month CD rate moved up this past week. AloStar Bank of Commerce held the best bank rate in this category in the preceding week at 1.12 percent but has now been upstaged by Bank of Internet. AloStar continues to promote a six month CD rate at 1.12 percent however; Bank of Internet has increased their six month CD rate to 1.15 percent to position itself as the top CD interest rate in this maturity.
The top one year CD rate was also shuffled up this week. Last week, MetLife Bank had the highest one year CD rate at 1.30 percent but has no been demoted to the second best rate after Bank of Internet increased their one year CD rate. The Bank of Internet category leading one year CD interest rate is at 1.33 percent followed by MetLife Bank at 1.30 percent.
In the two year CD term category, MetLife continues to have the best rate. MetLife has maintained the best two year CD rate promotion for a few weeks with a yield on their two year term certificate at 1.55 percent. The best two term CD is followed by two banks that offer a two year CD five basis points lower at 1.50 percent, Hudson City Bank and Bank of Internet.
The five year CD rate is the one maturity that saw a decrease in the top rate available nationally. Prior to the most recent bank CD rate survey, EverBank offered the highest five year CD with an interest rate of 2.54 percent. EverBank has since reduced that rate which has pushed Hudson City Bank to the top of the class. Hudson City
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Many people believe that lowering their credit card interest rates is an impossible task and they do not even try to get the rate that they pay reduced. They would be surprised to learn that it is possible for anyone to lower their credit card interest rates by using some simple and efficient methods. One of the best ways to lower these interest rates is to negotiate with the creditor directly and ask for the rate to be lowered.
How Are Interest Rates Determined?
The interest rate that is assigned to a credit card account is determined by the credit card issuer and based on a complicated formula that assigns a level of risk to the account based on the credit score and payment history of the account holder. Different types of credit cards will have different minimum and maximum interest rate levels, with the lower interest rates going to the individuals with the highest credit scores and the higher interest rates offered to the applicants with the lowest scores. There is a legal limit to the amount of interest a credit card issuer can charge and many sub-prime credit card lenders charge this maximum.
Lowering The Interest Rate
If the account holder has been doing business with the company for several years or more, they may be able to lower their interest rate by negotiating directly with a representative of the company. This representative will be able to look up information about the account, including how long the account has been opened and whether the account has remained in good standing during that time. If the representative is able to see a clear pattern of responsibility and timely payments, they will be more likely to flag the account for an interest rate reduction.
A significant improvement in the account holder’s credit score can also result in a reduction in the amount of interest a person pays for their credit cards. Individuals that regularly check their credit report and credit score should contact the companies that issue their credit cards when their credit score reaches a new level, such as moving from fair to good or good to excellent categories. A reduction of a few percentage points in the interest rate for a credit card can save the person thousands of dollars over the years that they hold the account.
Interest rates on savings accounts have been cut by as much as 0.50 per cent since the beginning of the year, as deals have been replaced or withdrawn.
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