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predicting interest rate changes
Old 05-05-2006, 05:39 AM   #1
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predicting interest rate changes

OK - I lied a little on the title. I don't think anyone can predict interest rate changes but - Do any of you think that you get warning before CD rates make a major move?

In other words, if rates go down - is there usually time to lock in cd rates or do they move too quickly on goverment/market changes. Trying to lock in some best rates. I'm only asking for opions based on the knowledge/experience/wisdom of the group. Thanks.
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Re: predicting interest rate changes
Old 05-05-2006, 06:40 AM   #2
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Re: predicting interest rate changes

The problem with this idea is that rate moves usually happen fairly gradually. Quarter point here, quarter point there... Before you know it rates have really fallen. Buy a ladder or buy something without too much duration and don't worry about it.
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Re: predicting interest rate changes
Old 05-05-2006, 08:22 AM   #3
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Re: predicting interest rate changes

U.S, is technically at full employment, salary increases are accelerating,manafacturing is at 90% Capacity, Greenback has weakened severly against most major currencies, doesn't take much to figure out which way rates are going.

Bernake may delay, but the longer the Fed dithers, the quicker the hikes, I suspect this years elections may be a factor in the fed's actions.
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Re: predicting interest rate changes
Old 05-05-2006, 01:03 PM   #4
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Re: predicting interest rate changes

Quote:
Originally Posted by Mysto
OK - I lied a little on the title.* I don't think anyone can predict interest rate changes but - Do any of you think that you get warning before CD rates make a major move?
No.

Quote:
Originally Posted by Mysto
In other words, if rates go down - is there usually time to lock in cd rates or do they move too quickly on goverment/market changes.
By the time you read the morning news, it's already too late.

Quote:
Originally Posted by Mysto
Trying to lock in some best rates. I'm only asking for opions based on the knowledge/experience/wisdom of the group. Thanks.
You can lock in the best rates every day, although the following day you may be long & wrong. A year ago 5% on a five-year CD seemed like a great deal, now I'm doing the penalty math to break it for a higher rate.

The best way to smooth the bumps is to keep refinancing the fixed-rate mortgage whenever it makes sense (for example when the payback is less than a year) and laddering the bonds/CDs.
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Re: predicting interest rate changes
Old 05-05-2006, 01:18 PM   #5
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Re: predicting interest rate changes

Well, the fed only has control over short-term rates. So, the question becomes "can you predict short-term rate changes?"

In theory, the yield curve is the best predictor of rate changes. You can think of long-term rates as sort of interest rate futures.

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