Entering text into the input field will update the search result below

Fed Just Locked In Low Rates For Savers

Sep. 16, 2020 4:01 PM ET
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.


  • Surveys suggest savers expect higher rates.
  • The Fed just dashed their hopes.
  • Real return on savings is likely to stay low for a long time.

NY Fed survey of consumer expectations (Survey of Consumer Expectations - FEDERAL RESERVE BANK of NEW YORK) shows more than one quarter of respondents believe savings rates will be higher one year from now.

The interest rate on savings often moves with the Fed Funds Rate.

The Fed just announced that we shouldn’t expect to see an increase in either for a long time.

So, these survey respondents are likely to be disappointed.

Moreover, if the Fed’s projection for 1.7% PCE inflation in 2021 is accurate, these paltry nominal savings rates of 0.05% will imply -1.65% in real terms.

Going beyond next year, the Fed expects to keep rates at/near the zero lower bound.  Moreover, the Fed is willing to let inflation rise above it’s 2% target.  As I wrote here (Fed Doesn't Expect To Hit Inflation Goals Until After 2023 - Mike Aguilar), that "higher" inflation isn’t expected to happen until sometime after 2023.  When it does occur, the real rate on savings accounts could easily be as low as -2% or -3%.

Saving for retirement just got more difficult.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.