Best Savings Rates Unchanged as Sequestration Cuts Government Spending

There is a tug of war between the Federal Open Market Committee doing everything in its power to foster growth and the politicians in Washington doing everything to stymie growth. For now it appears the FOMC is winning by keeping interest rates low and buying long term bond to send bond yields lower.

A low fed funds rate and low long term bond yields means savings rates will also stay low for the time being. The average savings account rate on account balance of $10,000 are at 0.52 percent and the best savings rates are almost twice as high at 1.00 percent. The highest savings rates on our rate list at 1.00 percent are from two banks, CIT Bank and Barclays Bank.

The highest money market account rates this week also remain unchanged at 1.01 percent APY. The highest money market rate on our list is from EverBank, which is currently offering a 6 month promotional rate of 1.25 percent with an ongoing rate of 0.76 percent. The first year's average APY on the account is 1.01 percent - enough to secure the top money market rate.

The government spending cuts are expected to subtract 0.5 percent from GDP growth in 2013. There is also a chance that Republicans and Democrats will forge a deal to stop the across-the-board cuts from happening. A deal is unlikely but either way, less government spending will happen in 2013 and the years to come which will dampen growth.

If the spending cuts were to throw the economy back into a recession, bond yields and interest rates would fall from current levels. Current 10 year bond yields which are now slightly above 2.00 percent would fall back to record lows of 1.40 percent. Another recession would send savings rates and money market rates below 1.00 percent, probably down to the 0.75 percent range.

Following is a list of the top savings rates and money market rates this week:

Best Savings Rates

• CIT Bank Savings Rates 1.00% APY 1.00%
• Barclays Bank Savings Rates 1.00% APY 1.00%
• Colorado FSB Savings Rates 0.85% APY 0.85%
• FNBO Direct Savings Rates 0.85% APY 0.85%
• Mutual of Omaha Bank Rates 0.85% APY 0.85%
• Ally Bank Rates 0.84% APY 0.84%

Best Money Market Rates

• EverBank APY 1.01%
• Union FSB Rates 1.00% APY 1.00%
• Able Banking Rates 0.85% APY 0.85%
• Seacoast Commerce Bank 0.85% APY 0.85%
• Ally Bank Rates 0.84% APY 0.84%
• GE Capital Retail Bank Rates 0.80% APY 0.80%