The Federal Open Market Committee meets this week, with an announcement due Wednesday Jan. 27 at approximately 2:15 p.m. EST. While no rate change is in the cards, the Fed will still be in the news this week for a couple of reasons.
First, of course, is the aforementioned FOMC meeting and any adjustments to the accompanying statement. The focus is always on whether the phrase “for an extended period” will remain, an indication of how long the Fed expects to hold off on raising interest rates. So while I expect that phrase to remain, it’s the phrase right before it “exceptionally low levels of the federal funds rate” that is most subject to tweaking.
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Week
Three banks failed today. It has been three weeks since there has been 3 or more bank failures on a Friday. All 3 banks were relatively small. One had around $500 million in assets. The other two were tiny with well under $100 million in assets. Total cost to the Deposit Insurance Fund was just under $300 million which is fairly small compared to the losses in previous weeks. Some had speculated that the FDIC may have slowed the closures until the assessment money from the banks start coming in to replenish the DIF.
All of the three closures today were typical. The FDIC was able to find buyers for all three, and the buyers agreed to assume all deposits, even those above the FDIC limit.
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Three Banks, Week
Banks slashed returns on many of the best-paying certificates of deposit just before Labor Day, making the last week of the summer one the most dismal weeks of the summer.
We’re not talking about a few basis points here and there, we’re talking about the top, nationally-available 6-month, 12-month, 18-month and 24-month CD rates being whacked by as much as a full point.
All three banks that had been offering the best 12-month CDs dramatically lowered their yields:
United Central Bank reduced its rate from 2.25% APY to 1.25% APY.
Frontier Bank reduced its rate from 2.25% APY to 2.05% APY.
Wilshire State Bank reduced its rate from 2.15% APY to 1.75% APY.
United Central also lowered what had been the top-ranked 6-month CD rate from 2.00% APY to 1.70% APY.
Citibank pared its leading 18-month CD rate from 2.25% to 2.00%.
Frontier cut the best 24-month CD rate from 2.60% APY to 2.40% APY.
Broadway Federal Bank took an even bigger whack out of its 24-month rate, lowering it from 2.53% APY to 2.02% APY.
With the average returns on 3-month, 6-month and 12-month CDs plunging to new record lows this week, we can only wonder where and when this race to the bottom is going to end.
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Banks Slash, Week
