Best Bank CD Rates Unchanged as 4th Quarter GDP Contracts

The best 1 year bank CD rates were unchanged this week as the fourth quarter GDP advance estimate report was released, showing a slowing economy at the end of 2012.  The best CD rates in our 1 year certificate of deposit rate database is at 1.04 percent and average 1 year rates remain increased three basis points from 0.69 percent to 0.72 percent.

The first estimate for fourth quarter GDP growth actually showed the economy contracted 0.1 percent in the final three months of 2012. While the report was a surprise, the news isn't all that bad because the contraction was due to two factors, a big drop in government defense spending and lower business inventory growth.




First quarter 2012 GDP is expected to show growth of around 2.00 percent, thus avoiding back-to-back contractions in the economy, which would technically mean a recession. Another major economic report released last week was January's unemployment report, which showed 157,000 jobs were created and the unemployment rate ticked up from 7.8 percent to 7.9 percent.

The headline jobs number of 157,000 jobs was slightly weaker than expected but the news is better for jobs created in 2012. Revisions to the payroll survey for November and December 2012 added 127,000 jobs. The average number of jobs created for the final quarter of 2012 was 200,000 per month - a lot better than previously thought.

Stronger growth and lower unemployment might mean higher interest rates in 2013. When the unemployment rate drops to 6.5 percent or below, the Federal Open Market Committee will pull back on stimulating the economy. This will mean a higher federal funds rate and in turn, CD rates at banks will move higher.

If this scenario plays out in 2013, it will be welcome news because the Fed says they plan to keep the Federal Funds Rate at near zero percent until mid-2015, two years sooner than expected. After almost 5 years of watching interest rates on all CD terms falling to record lows, it would be nice to report on higher CD rates.
 
Author: Jason P. Jones
February 2nd, 2013
Posted in: CD Rates from Banks