Written by Back in 2008 the U.S. fell into the deepest recession since the Great Depression. Economic growth was negative only a few quarters but the decline in Gross Domestic Product (GDP) was steep. 3rd quarter 2008 GDP was minus 4.0 percent, fourth quarter GDP was minus 6.8 percent. This caused the Federal Reserve to force interest rates down to record lows, as a result mortgage rates and deposit rates fell to record lows. Right now current mortgage rates are averaging the low point in decades.
The declines wasn’t as bad in the first quarter of 2009. GDP was only minus 0.7 percent, a nice rebound of the steep lows. Part of the reason for the rebound was government spending and the other part was record low interest rates. GDP turned positive again in the second quarter of 2009 and we have had seven consecutive quarters of positive growth.
Growth has returned and will be positive for the foreseeable future but interest rates are still very low. The current Fed funds rate is in a targeted range of zero percent to one quarter percent. This low rate as forced deposit rates down to record lows. CD rates monitorbankrates.com/cdrates , money market rates and savings account rates are all at record lows.
Loan rates are also at record lows. Mortgage rates, auto loan rates and other loan rates are very attractive right now and are having some affect at stimulating demand.
Interest rates will be heading higher over the next couple of years as the economy improves. 10 year bond yields have already increased quite a bit in recent months, leaving the Treasury yield curve noticeably steeper.
To keep inflation in check the Federal Reserve will increase interest rates as inflation becomes a concern. All deposit rates including savings account rates, money market account rates and CD rates will go higher in 2011 and beyond.