2013 May Bring Higher Savings Rates and Money Market Rates

Recent stronger than expected economic news in 2013 brings us hope savings rates and money market rates will increase sooner than the expected mid-2015 time frame in which rates are expect to remain near record lows. The Federal Reserve has stated they plan to keep the Fed funds rate at near zero percent until mid-2015 to help the economy, housing market, and to lower the unemployment rate.

Over the past couple of months a series of strong economic reports have been released including stronger than expect housing starts, housing sales and higher home prices. Other positive news includes the highest consumer confidence in over four years and stronger than expect Gross Domestic Product (GDP) for the third quarter of 2012.

The last hurdle to higher interest rates is the second part of the fiscal cliff. The tax part of the fiscal cliff was figured out by Republicans and Democrats in Washington. The last pieces in the puzzle are on the debt side of the fiscal cliff. There are three debt issues coming up over the next few months - the debt ceiling limit, the sequester, and the annual appropriations that have to be decided on.

Negotiations on these three will be a lot harder than the tax side of the fiscal cliff. Markets will be subjected to daily or weekly negotiations - both good and bad. Hopefully agreements can be made without too much damage to the economy, investor confidence, and consumer confidence.

Once we are past the debt hurdle, the economy should take off due to pent up demand - especially in housing. A strong economy will lead to a quick drop in the unemployment rate which will lead to the Federal Reserve increasing the Fed funds rate and discount rate. When these rates move higher, banks and credit unions will increase savings account rates.

There are a lot of variables in our belief that interest rates will move higher in 2013. If the increase in rates start, it will be in the second half of 2013 and most likely in the fourth quarter. You can use our rate tables to find the best savings account rates and best money market account rates nationally.
Author: Lisa Graham
January 4th, 2013