Bank deposit savers were undoubtedly hoping for a, albeit unlikely, hint from FED chairman Ben Bernanke that the FED would begin raising rates this week. Of course this didn’t happen, however, for the first time in a long time he didn’t immediately signal towards a new round of US Treasury bond purchases in an attempt to lower long-term interest rates – a move that effectively lowers the annual percentage yields provided on deposits at both credit unions and banks.
In this week’s annual Jackson Hole, Wyoming meeting, Bernanke simply reiterated that the FED, “has a range of tools that could be used to provide additional monetary stimulus.” The most powerful of these tools being another round of bond buying. Given Wall Street calms down from it’s tumultuous two weeks of roller coaster buying spree’s and sell-offs, the noise being created by the opposition of bond buying will continue to be significantly louder this year than in previous years – claiming the results would be unprecedented inflation and little in the way of economic easing.
Perhaps the most valid argument against another round of bond buying is the mere question of whether or not another round of bond buying is even needed (or will even help). The yield on 10 year treasury notes is already sitting at a historic low of just 2.19% – a level not likely keeping many on-the-fence-borrowers out of the market for a new home, car, etc.
Despite hearing opposition from Congress (largely made up of Congressional Republicans) Bernanke is also getting backlash from his own crew. According to this article Wells Fargo’s chief economist John Silvia noted that “three of the 10 members on the Fed’s policy committee voted against Bernanke’s plan to keep short-term rates near zero through mid-2013.” He also went on to state that, “when you’re dealing with three dissents it’s hard to have an aggressive policy.”
So while we wish we could hint towards more positive news for savers, we can simply suggest that rates on bank deposits and savings accounts shouldn’t get worse – a claim we could never make last year at this time.