Search

Just another WordPress site

Federal reserve increases interest rates

Exclusive – Vivek Ramaswamy: Slash Federal Reserve by 90 Percent, Use Growth to ‘Unleash America’

by www.breitbart.com Leave a Comment

Republican presidential candidate and entrepreneur Vivek Ramaswamy told Breitbart News in an exclusive interview that slashing the Fed and unleashing growth is the key to getting out of the banking crisis.

Ramaswamy spoke to Breitbart News as the banking crisis continues to unfold, leaving many to wonder how America can get out of this situation.

As the world becomes increasingly engulfed in economic turmoil, Ramaswamy said he remains the only presidential candidate that has highlighted the Fed’s deep flaws that have led to the current economic uncertainty.

The American entrepreneur said that reforming the Federal Reserve — or slashing 22,000 employees at the Fed and severely narrowing the Fed’s duties — will help prevent future banking crises like the one America is currently experiencing.

He said the Federal Reserve has wrongly tried to play “God” by trying to hit two targets with one arrow by tackling both unemployment and inflation, describing it as a “disastrous” 25-year experiment. He said that the Fed should solely focus on stabilizing the American dollar than tackle too many economic issues at the same time.

Ramaswamy contended that the Fed relies too much on the alleged Phillips curve, which he said is based on a “flawed premise” and old historical data that does not apply to the modern American economy. The Phillips curve holds that there is a trade-off between inflation and employment: if unemployment goes too low, inflation is likely to go too high. Policymakers, especially at the Fed, are often implicitly using the Phillips curve when they say they need to reduce demand for workers to fight inflation.

Many lawmakers, including Sen. John Kennedy (R-LA), have questioned the need to raise unemployment rates to curb inflation:

Senator John Kennedy / YouTube

Ramaswamy also blamed the Fed for using lagging indicators of the boom-bust business cycle, such as wage growth, meaning that they may not be using data that would allow the Fed to see how the economy is adapting to higher interest rates in real time or anticipate changes not yet in backward looking data.

This has led many, including former Federal Reserve chair Ben Bernanke, to say that the Fed was slow to raise interest rates when inflation started to rapidly increase.

Now that the country appears to be entering another period of economic turmoil, Ramaswamy says that “reform of the Federal Reserve is critical.”

He said, “I’m going to, for that reason, restore its mission to a single purpose and you don’t need 22,000 employees to do it. You need way less than 2,000. That means over 90 percent headcount reduction there.”

Ramaswamy pivoted, saying the country needs to focus on ways to stimulate the economy in major ways rather than “quibbling” over spending increases, tax increases, or spending cuts.

“There’s an anti-growth movement in the country and part of the left that says, ‘You should learn to live with less.’ That’s what the climate cult is all about,” he explained, and that we need to “unleash American energy.”

He said that the country needs to put “people back to work” and remove “incentives” not to work. He said that Americans could easily get subsidies to become a gender studies major, but many may not have the resources to become a welder or a construction worker.

Ramaswamy said that America is “starving” for economic growth that will get America out of the current crisis and put Americans back to work.

He explained, “Broadly speaking, abandon the climate continental issue with energy and put people back to work by stopping giving them market-distorting incentives not to work and that I think are to be combined with Federal Reserve reform actually is a path to restoring GDP growth in this country, so that we don’t have to argue about small ball from entitlement cuts to tax increases about how we deal with our deficit, but actually restore growth, which in turn is actually our best way out of our other economic issues as well. No other candidate’s talking about it. I am the leading pro-growth candidate in this race. And I think that pro-growth economic agenda is something that I think the country is starving for, and I’m going to deliver it.”

Watch Breitbart News Editor-in-Chief Alex Marlow’s interview with Ramaswamy on “Woke Capital” here:

Matt Perdie / Breitbart News

Sean Moran is a policy reporter for Breitbart News. Follow him on Twitter @SeanMoran3 .

Will CD rates go up in 2023?

by www.sfgate.com Leave a Comment

The early months of 2023 have been a boon for savers: The best interest rates on certificates of deposit (CDs) have topped 5%, the highest they’ve been in about 15 years. Since CDs require a commitment, however, that leaves many wondering: Will CD rates go up even more in 2023? Or have they hit their peak? The answer depends on where the economy goes as well as what happens in the banking system.

An interest rate is nothing more than the price of money, and like any price, it’s determined by supply and demand. The more that consumers, businesses and governments want to borrow money, the higher rates will go. The more that people want to save, the lower rates will go. Of course, the Federal Reserve system can give rates a nudge to help manage the economy.

What are today’s CD rates?

According to Bankrate’s most recent data, the average CD rates for the week of March 15 are:

  • 1-year CD rate: 1.62%
  • 5-year CD rate: 1.24%
  • 1-year jumbo CD rate: 1.71%
  • 5-year jumbo CD rate: 1.30%
  • Money market account rate: 0.31%

If you’re willing to shop around, however, you may find higher rates, especially if you consider online banks , which tend to pay more interest.

What influences CD rates

CD rates are based in part on the federal funds rate , which is the interest rate on balances that banks hold at the Federal Reserve banks. When the central banks want to soften or strengthen the economy, they adjust the rates that they charge or pay banks in the system. The Fed has raised the federal funds rate nine times in the past year in an aggressive campaign to cool inflation. Most recently, it hiked interest rates by 0.25% on March 22, bringing the benchmark borrowing rate to between 4.75% and 5%.

Member banks then set the rates that they charge on loans and pay on savings accounts, including certificates of deposit. Considerations include the fed funds rate, whether the bank needs deposits to fund its loan portfolio, and what competitors are doing. To protect member banks from overpaying to attract capital, the Federal Deposit Insurance Corporation sets a cap for less than well capitalized institutions.

Because many factors go into setting CD rates , savers find it pays to check out the offerings at multiple banks before locking their money away.

Where experts predict CD rates will go next

Several economists have made interest rates forecasts for 2023, which give some insights for the direction of CD rates.

Of course, forecasts quickly become outdated. For example, the failure of Silicon Valley Bank in early March, and the revelation of weaknesses at other banks , has increased risk in the economy. That is likely to lead to increased interest rates.

Pros and cons of CDs

Because a CD is a commitment, you’ll want to consider how it fits into your personal financial picture.

Pros

  • Higher interest rates
  • A safe, FDIC-insured way to save money
  • Fixed interest rate, so it will stay the same for the term even if the market shifts
  • You can predict how much your money will grow

Cons

  • Your money is locked in for a specific amount of time
  • There are penalties for early withdrawals
  • The fixed interest rate can turn into a negative if rates on other types of savings accounts go up during the term
  • Lower return over the long-term than you’d get from investing in the stock market

The bottom line for 2023 CD rates

The consensus for interest rates seems to be that rates are likely to be steady this year. This means that CD rates are probably as high as they are likely to be. Still, if you’re concerned about missing out, look for CDs that have no penalty for moving funds into a CD with a higher rate.

Editorial Disclosure: All articles are prepared by editorial staff and contributors. Opinions expressed therein are solely those of the editorial team and have not been reviewed or approved by any advertiser. The information, including rates and fees, presented in this article is accurate as of the date of the publish. Check the lender’s website for the most current information.

This article was originally published on SFGate.com and reviewed by Lauren Williamson, who serves as Financial and Home Services Editor for the Hearst E-Commerce team. Email her at [email protected] .

More Personal Finance

Remember money market accounts? Rates are back up to 4.5%

by www.sfgate.com Leave a Comment

The recent increase in interest rates on various types of savings products is bringing back money market accounts. If you weren’t around for their heyday in the 1970s and 1980s, when short term interest rates reached 20%, or if you’ve forgotten, this guide will get you up to speed. After all, the fed funds rate has increased from 0.25% a year ago to 4.5% today. We’ll explain what a money market account is, what kind of rates you can get today and more, so that you can decide whether to add one to your portfolio.

So what is a money market account? The short answer is that it’s a type of savings account that pays higher interest than regular savings and checking accounts, with greater liquidity than a certificate of deposit. As always, the details make for a much longer answer. To begin with, money market accounts offered by banks and money market accounts offered by mutual fund companies and brokerage firms are different, despite the similar name. We’ll explain.

What are money markets?

In financial circles, the money market is where high-quality, short-term debt securities are traded — generally government or corporate bonds that mature in one to 30 days. These securities are usually safe because investors have a pretty good idea of what the world will be like a month from now.

Money market account rates fluctuate to reflect current market activities, and they are especially robust when interest rates are increasing. Many investors like that they’re relatively safe while offering higher interest rates than you can find on traditional savings accounts. Bankrate reports that as of March 16, the average savings account paid 0.23% interest, while bank money market accounts pay as much as 4.5% and Vanguard’s Federal Money Market Mutual Fund has a 7-day yield of 4.55% .

What is a money market demand account?

A money market demand account is the technical term for a money market account at a bank. It usually pays higher interest than a regular bank account but lower interest than a certificate of deposit. Rates fluctuate alongside the rate being paid in the money markets right now. Bank money market accounts usually have relatively high minimum balances and limit the number of withdrawals that you can make each month, but account holders can take money out without paying a penalty. (These accounts are also accessible via check or debit card, which makes it easy to withdraw money when you need to.) These are federally insured based on current FDIC limits — up to $250,000 per depositor per account.

Key characteristics of bank money market accounts:

  • FDIC insured , up to $250,000

  • Limit of six withdrawals per month by check, debit card, draft or electronic transfer

  • Unlimited withdrawals by ATM, in person, by mail, messenger or telephone check

  • Usually have a high minimum deposit requirement

When looking at a money market account vs. a savings account , compare the current rate of interest and the minimum account balance. Some savings accounts pay money market rates when the balance hits a predetermined level, so it’s worth reviewing all of your options before deciding on an account.

What is a money market mutual fund?

A money market mutual fund is an account offered by a mutual fund company or brokerage firm. It invests in money market securities and usually allows regular withdrawals. Money market account interest rates tend to be higher than bank money market accounts , but mutual funds are riskier: These accounts are not federally insured. As with money market demand accounts, they may require a high minimum account balance.

Money market mutual funds are managed so that the net asset value (NAV, which is the value of the fund’s assets divided by the number of shares) is equal to $1. Some fund companies allow investors to write checks or make ATM withdrawals on their accounts.

Key characteristics of money market mutual funds

  • Not FDIC insured
  • May include checkwriting and ATM privileges. Check the offering documents for information
  • Companies may limit withdrawals in times of market crisis
  • Usually pay higher interest rates than bank money market accounts, but not always

During the 2008 financial crisis, some money market mutual funds had trouble maintaining the $1 NAV. They “broke the buck,” as traders say, and some investors lost money. After that, the U.S. government imposed regulations to protect most money market mutual fund investors. Among other things, the issuing companies have the right to impose fees on withdrawals or stop them all together if the markets are under stress.

The bottom line on money market accounts and money market funds

Money market funds are great for emergency funds, savings accounts, or other cash where you want ready access and a market rate of interest. When shopping for these accounts at banks, look at the minimum account balances, withdrawal policies and fees, and the rate of interest compared to CDs and saving accounts.

When shopping for money market funds at a mutual fund company, take a look at minimum account balances, whether check or ATM access is offered, withdrawal policies, interest rates, and fees.

Either option could be a good addition to your portfolio right now if you want to have the accessibility of a checking account while taking advantage of the 4%-plus interest rates you can find on high-yield savings accounts these days.

Editorial Disclosure: All articles are prepared by editorial staff and contributors. Opinions expressed therein are solely those of the editorial team and have not been reviewed or approved by any advertiser. The information, including rates and fees, presented in this article is accurate as of the date of the publish. Check the lender’s website for the most current information.

This article was originally published on SFGate.com and reviewed by Lauren Williamson, who serves as Financial and Home Services Editor for the Hearst E-Commerce team. Email her at [email protected] .

More Personal Finance

Best savings accounts of the week: Banks offering up to 4.25 percent interest rate

by www.express.co.uk Leave a Comment

Woman on phone

Savers are looking for the best interest rates (Image: GETTY)

Invalid email

We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info

Experts from Nerdwallet are sharing the best savings rates currently available on the market in the USA. This full list of top accounts comes following the Federal Reserve’s decision to hike interest rates by 0.25 percentage points.

Here is a full list of the banks which are offering the best savings interest rates, alongside the names of the accounts:

  • CIT Bank – Savings Connect – 4.20 percent interest rate
  • LendingClub – High-Yield Savings – 4.25 percent interest rate
  • Synchrony Bank – High Yield Savings – four percent interest rate
  • Discover Bank – Online Savings – 3.60 percent interest rate
  • American Express® – High Yield Savings Account – 3.75 percent interest rate
  • Citi® – Accelerate Savings – 3.85 percent interest rate
  • SoFi – Checking and Savings – four percent interest rate
  • Citizens – Online Savings Account – 4.25 percent interest rate.

READ MORE: Inheritance tax expert says now is a good time to use up allowance

Federal Reserve

The Fed has raised rates to combat inflation (Image: GETTY)

What are the best savings accounts?

Notably, one of the accounts which provides the best savings interest rate for the week beginning March 20, 2023, is Lending Club’s High-Yield Savings.

This particular account pays an interest rate of 4.25 percent APY with a no minimum balance after an initial $100 to open it.

There are no monthly service fees attached to this savings account and a free ATM card with the High-Yield Savings is available.

The application for this Lending Club account only takes three minutes to complete and applicants need their Social Security Number.

DON’T MISS

Trending

Furthermore, the other top interest rate on offer comes from Citizen’s Online Savings Account.

Savers are able to earn a rate of 4.25 percent APY which is 21 times the national rate of 0.19 percent.

There are no promo and teaser rates, or hidden costs and fees linked to this particular savings product.

Applications for this account can be made via the Citizen’s website and take around five minutes to complete.

READ MORE: Recession fears continue despite UK economy growing

Interest rates

Banks are offering up to 4.25 percent to savers (Image: GETTY)

Following these banks on the list is CIT Bank’s Savings and Conncent product which awards customers with a 4.20 percent interest rate.

SoFi’s Checking and Savings Account, and Synchrony Bank’s High Yield Savings product, both pay four percent to savers.

Citi®, American Express® and Discover Bank are linked to interest rates of 3.85, 3.75 and 3.75 percent, respectively.

Following the Federal Reserve’s most recent intervention, the central bank’s target rate range is between 4.75 to five percent.

After last week’s rate hike, David Goebel, associate director of investment strategy at Evelyn Partners, shared why the Fed chose to raise rates at this time.

He said: “Less than two weeks ago Fed chair Powell was suggesting that it may be appropriate to increase rates by 50 basis points at this meeting if the data continued to show strength.

“Since then, February’s 300k job growth and 0.5 percent monthly core CPI inflation reading bolstered this case, and the meeting may have delivered it were it not for problems in the banking sector.

“The failure of Silicon Valley Bank in the US and Credit Suisse in Europe caused market participants and the Fed alike to reconsider the path for interest rates in the US.”

Further information on the best savings accounts for March 2023 can be found on Nerdwallet’s website .

Why you should put your money in a CD right now

by www.sfgate.com Leave a Comment

The Federal Reserve raised interest rates by a quarter point on March 22, following nearly two weeks of speculation amid turmoil in the banking industry . That brings the benchmark borrowing rate for federal funds to between 4.75% and 5%.

However, it may be a turning point in the Fed’s fight against inflation: The Federal Open Market Committee maintained its projection for the terminal rate — that is, the highest the federal funds rate will go — at 5.1% by the end of 2023. That would mean just one more rate hike before the end of the year, with the expectation that the Fed will begin cutting interest rates in 2024.

The Fed’s historic series of rate hikes — nine consecutive increases over the past year — has been excellent news for savers . Interest rates on certificates of deposit (CDs) and high-yield savings accounts are at their highest levels in nearly 15 years. Short-term CDs, those with terms of 1 year or less, have had the best returns, with some topping 5%. Meanwhile, interest rates on some high-yield savings accounts are upwards of 4%.

By keeping its projection for the terminal rate steady, however, the Fed is signaling that its campaign of rate hikes may be coming to an end. If that’s the case, interest rates on savings vehicles have probably peaked. That’s why if you’ve been considering moving your money into a CD, this is the moment to lock in the best rates in recent memory.

The Federal Reserve doesn’t set interest rates on CDs or other consumer financial products, but its actions have an effect on them. When the federal funds rate goes up, banks tend to raise interest rates on deposits like savings accounts and CDs as a way to attract more customers.

Interest on savings accounts has risen more slowly this past year than conventional wisdom would suggest. But it’s still more than tripled since the Fed started its push in March 2022. As of March 22, the national average interest rate for savings accounts is 0.23%, consistent with the previous week, according to Bankrate’s weekly survey.

If you’re looking for the greatest return, online banks tend to offer much better interest rates than traditional banks — in some cases, thousands of times higher. Short-term CDs — those that lock your money in place for a year or less — have the best returns right now, with some interest rates topping 5%. They’re an excellent option if you plan to leave your money in place for a while. The most fruitful high-yield savings accounts, on the other hand, are offering interest rates upwards of 4%. Most high-yield savings accounts provide the same accessibility as traditional savings accounts , such as the ability to easily transfer money to a checking account . They’re a great match for people who need flexibility with their funds.

When you commit to a CD, the bank is also making a promise: that it will honor the same interest rate for the length of the term. Terms typically range from one to five years (though you can find CDs with terms as short as three months). In most cases, you’ll find the best interest rates on CDs with longer terms, though as previously mentioned, at the moment many of the best rates are on 1-year CDs.

Once you put your money in a CD, you must leave it there for the length of the term or you’ll have to pay a fee for taking it out early (known as an early withdrawal penalty). You also can’t add to it once the term starts. So before locking any of your money in a CD, you’ll want to be certain you can afford to part with it for that long. That’s why most people will have a mix of CDs and savings accounts, which let you withdraw money when you need it.

CDs are a low-risk way to grow your savings, aside from the risk you might incur by locking your money in one place for a specific length of time. CDs are insured up to $250,000, as long as they’re with a bank that’s insured by the Federal Deposit Insurance Corp. (FDIC) or a credit union insured by the National Credit Union Administration.

Once your CD matures (that is, reaches the end of its term), you will typically have seven to 10 days to decide what to do next. You can renew the CD at the current rate, withdraw the money, or move it to another account or CD. If you do nothing, most banks will renew the CD for the same term but at the current rate, which might be higher or lower than the rate when you originally took out the CD.

In a press conference after the March 22 rate hike, Fed Chair Jerome Powell declined to say whether the FOMC would impose more rate hikes in 2023, in light of the economic turbulence created by the Silicon Valley Bank collapse.

“It is too soon to determine the extent of these effects and therefore too soon to tell how monetary policy should respond,” he said. “As a result, we no longer state that we anticipate that ongoing rate increases will be appropriate to quell inflation; instead, we now anticipate that some additional policy firming may be appropriate.”

Powell said that the FOMC “considered” holding off on an increase this month in response to the banking crisis. But ultimately they decided that another immediate rate hike was necessary to further curb inflation.

“Inflation remains too high, and the labor market continues to be very tight,” he said. “Price stability is the responsibility of the Federal Reserve. Without price stability, the economy does not work for anyone.”

Since the FOMC’s last meeting, inflation indicators haven’t provided a clear path forward for the Fed. Prices of goods and services rose 6% in February over the previous year, a small decline from the 6.4% increase in January, according to the Consumer Price Index report released March 14.

Employment , meanwhile, remains strong, with 311,000 new jobs created in February, according to the jobs report released March 10. Unemployment, however, ticked up slightly to 3.6%, higher than the expected 3.4%, showing that the labor market might be starting to soften.

Then there’s the instability thrust into the economy by the banking crisis. The Fed is also likely to begin facing greater pushback from Congress in the coming months. Senate Majority Leader Chuck Schumer said after the Fed’s March 22 announcement that he was “concerned about [the latest hike’s] effect on the economy.”

The upshot for consumers: If the Fed sticks to its projections for the terminal rate, there’s a decent chance that CD rates are as good as they’re going to get for this rate hike cycle. If you’ve been sitting on the fence about opening a CD, it’s a great time to lock in an excellent rate for the next year.

Editorial Disclosure : All articles are prepared by editorial staff and contributors. Opinions expressed therein are solely those of the editorial team and have not been reviewed or approved by any advertiser. The information, including rates and fees, presented in this article is accurate as of the date of the publish. Check the lender’s website for the most current information.

This article was originally published on SFGate.com and reviewed by Jill Slattery, who serves as VP of Content for the Hearst E-Commerce team. Email her at [email protected]

More Personal Finance