August has proven to be a strong month for stocks, but the focus is shifting towards the Federal Reserve's upcoming meeting on September 15-16. Fed funds futures indicate a 65% chance of a quarter-point increase in the benchmark lending rate, which would raise it to a range of 3.75% to 4%.
Fed Chairman Kevin Warsh expressed concerns about ongoing inflation, noting that while recent readings have improved, they do not reflect a significant change in underlying trends. The July personal consumption expenditures price index rose at an annual rate of 3.7%, exceeding expectations and remaining well above the Fed's 2% target.
For savers, this environment of rising rates is beneficial, as banks are competing for deposits by offering attractive yields on CDs. For instance, Sallie Mae recently increased its one-year CD rate to 4.2%, surpassing the peer median of 3.95%. Other banks, such as Popular Direct and CIBC, are also providing competitive rates of 4.25% and 4.15%, respectively.
Savers can find even higher rates with longer-term CDs, such as Synchrony Financial's 4.3% APY for a 16-month CD. However, potential investors should consider their liquidity needs and the penalties associated with breaking a CD before maturity, as well as the risk of automatic renewal at lower rates upon expiration