Impact of Fed. interest rate hike on CD rates

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protagonist
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Impact of Fed. interest rate hike on CD rates

Post by protagonist » Tue Jun 12, 2018 10:58 am

The Fed is expected to raise rates at the current (june 12-13) meeting.

What is your prediction as to the impact a rate hike will have on CD rates?

Because a Fed. benchmark rate hike is strongly predicted (as well as future hikes later this year), is this already likely factored into current CD rates, so we should expect little reaction in CD rates? Or would a Fed rate hike likely precipitate rapid (within the next week or two) increases in CD offering rates? Or would CD rates likely rise in response, but with a delay of a month or more?

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Doc
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Re: Impact of Fed. interest rate hike on CD rates

Post by Doc » Tue Jun 12, 2018 11:11 am

protagonist wrote:
Tue Jun 12, 2018 10:58 am
The Fed is expected to raise rates at the current (june 12-13) meeting.

What is your prediction as to the impact a rate hike will have on CD rates?

Because a Fed. benchmark rate hike is strongly predicted (as well as future hikes later this year), is this already likely factored into current CD rates, so we should expect little reaction in CD rates? Or would a Fed rate hike likely precipitate rapid (within the next week or two) increases in CD offering rates? Or would CD rates likely rise in response, but with a delay of a month or more?
None at all. The rate hike has been baked into the cake for weeks if not longer.

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http://www.cmegroup.com/trading/interes ... -fomc.html
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protagonist
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Re: Impact of Fed. interest rate hike on CD rates

Post by protagonist » Tue Jun 12, 2018 12:11 pm

Would it be reasonable to assume that the future projected hikes for this year and next are also already "baked in"?

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triceratop
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Re: Impact of Fed. interest rate hike on CD rates

Post by triceratop » Tue Jun 12, 2018 12:15 pm

protagonist wrote:
Tue Jun 12, 2018 12:11 pm
Would it be reasonable to assume that the future projected hikes for this year and next are also already "baked in"?
You can see the probabilities, i.e. the extent to which future possible hikes are "baked in", on the link Doc and I have provided.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

camaro327
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Re: Impact of Fed. interest rate hike on CD rates

Post by camaro327 » Tue Jun 12, 2018 5:07 pm

protagonist wrote:
Tue Jun 12, 2018 12:11 pm
Would it be reasonable to assume that the future projected hikes for this year and next are also already "baked in"?
Not really, because the fed comments will also be important. Short term CDs will continue to slowly track with the fed funds rate. Long term rates are more influenced by the market and long-term CDs will move in the same direction as the long-term rates however at a slower pace.

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