: Cash investors may be at ‘the top of the mountain.’ Here’s when 5% CDs and money market funds could finally end.

by | Sep 23, 2023 | Stock Market

The Federal Reserve just held off on another interest-rate hike, and the race is on for people trying to get the tip-top yields on their cash. Since March 2022, the central bank has been on a parade of interest-rate increases to quell inflation. The target range for the Fed’s key interest rate now sits at 5.25% – 5.50%, the highest it’s been in two decades. The Fed paused once before in June and raised another 25 basis points in July.

The Fed’s upward march has pulled up interest rates and yields, and that’s pulled cash investments such as bank certificates of deposit (CDs) and money market mutual funds into the spotlight. Both are generating average yields around 5%. But how much longer before the rates decline? The Fed’s pause Wednesday is one more reminder that savers have a limited window to make the most of high rates, experts say. “For cash investors, my guess is that the top of the mountain is the pause,” said Eugenio Alemán, chief economist at Raymond James. In recent decades, the first Fed rate cut has typically occurred around seven months after a pause, he said. “But this is not a typical cycle” of tightening and loosening rates, Alemán quickly added. The roughly seven-month interval from a pause to the first rate cut has replayed since the 1960s, said Steven Wieting, chief investment strategist and chief economist at Citi Global Wealth Investments. It’s “not at all implausible” that could happen …

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