FOMC Meets This Week to Decide Monetary Policy and the Direction of Interest Rates

The Federal Open Market Committee (FOMC) meets this week to decide monetary policy and the direction of interest rates. There is zero chance the FOMC will increase the federal funds rate but they will continue paring back their purchases of long term U.S. bonds and mortgage-backed securities (MBS).

What is means for CD rates, savings account rates, and money market rates is more of what we have seen the past 5 years - low rates. On the other hand, lowering their purchases of long term bonds and MBS will eventually send mortgage rates higher. We won't see higher CD rates and deposit rates until the Fed increases the fed funds rate, which isn't expected to happen until 2015.

Short Term Average CD Rates Mixed This Week

Shorter term average CD rates were mixed this week over last as some banks increased their rates by small margins. Current 3 month CD rates are averaging 0.23 percent, up from last week's average 3 month rate of 0.22 percent. 6 month CD rates at banks averaged 0.52 percent, down 0.01 percent from last week's average 6 month rate.

While average rates were mixed, the best CD rates on short term certificates of deposit were unchanged as no banks in our database increased their rates. The best 3 month CD rate remains at 0.45 percent and the best 6 month rate remains at 1.00 percent. Zions Direct's 6 month rate is the best bang for your buck right now since most banks are offering 1 year rates lower than 1.00 percent.

Intermediate Term CD Rates Higher on Average

Rates on intermediate term certificates of deposit were higher this week over last. 1 year CD rates this week are averaging 0.75 percent, up 1 basis point from last week's average 1 year rate. Average 2 year CD rates were also higher this week averaging 0.96 percent, up from last week's average 2 year rate of 0.93 percent.

As with short term rates, the best CD rates on intermediate term certificates of deposit are unchanged this week. The best 1 year bank CD rate this week remains at 1.09 percent with an APY of 1.10 percent. The best 2 year rate on our table is from a credit union at 1.40 percent with an APY of 1.41 percent.

Long Term Average 5 CD Rates Unchanged

Long term average 5 year rates are at 1.50 percent this week, unchanged from last week's average 5 year rate. Though the average 5 year rate didn't change this week, we have seen longer term rates move considerably higher the past 6 months as long term bond yields have risen.

The highest CD rates on 5 year certificates of deposit on our rate table are at 3.00 percent with an APY of 3.04 percent. This rate is almost double the average 5 year U.S. Treasury yield of 1.58 percent as of January 24, 2014.

Here is a quick rundown of the top CD rates for January 27, 2014.

Top 3 Month Bank CD Rates

• AloStar Bank of Commerce Rates 0.45%
• Pacific Mercantile Bank Rates 0.42%
• Virtual Bank Rates 0.40%
• Barclays Bank Rate 0.35%
• Discover Bank Rate 0.35%
• EH National Bank Rate 0.35%
• First Internet Bank of Indiana Rate 0.35%

6 Month Bank CD Rates

• Zions Direct Rate 1.00%
• Pacific Mercantile Bank Rate 0.90%
• Doral Direct Rate 0.87%
• EH National Bank Rate 0.85%
• AloStar Bank of Commerce Rate 0.75%
• giantbank.com Rate 0.70%
• My e-BAnC by BAC Florida Bank Rate 0.70%

12 Month Bank CD Rates

• AloStar Bank of Commerce Rate 1.09% APY 1.10%
• GE Capital Retail Bank Optimizer Plus Rate 1.04% APY 1.05%
• Pacific Mercantile Bank Rate 1.01% APY 1.02%
• My e-BAnC by BAC Florida Bank Rate 1.00% APY 1.01%
• The Palladian PrivateBank Rate 1.00% APY 1.00%
• Colorado Federal Savings Bank Rate 1.00% APY 1.00%

2 Year Bank CD Rates

• Pentagon Federal Credit Union Rate 1.40% APY 1.41%
• AloStar Bank of Commerce Rate 1.24% APY 1.25%
• CIT Bank Rate 1.19% APY 1.20%
• Pacific Mercantile Bank Rate 1.15% APY 1.16%
• Barclays Bank Rate 1.14% APY 1.15%
• GE Capital Retail Bank Optimizer Plus Rate 1.14% APY 1.15%
• GE Capital Retail Bank Rate 1.14% APY 1.15%

5 Year Bank CD Rates

• Pentagon Federal Credit Union Rate 3.00% APY 3.04%

• EverBank Rate 2.14% APY 2.16%
• Barclays Bank Rate 2.13% APY 2.15%
• iGObanking.com Rate 2.13% APY 2.15%
• State Farm Bank Rate 2.03% APY 2.05%
• VirtualBank Rate 2.00% APY 2.02%
• GE Capital Retail Bank Optimizer Plus Rate 1.98% APY 2.00%
• GE Capital Retail Bank Rate 1.98% APY 2.00%