Published July 19, 2012
AThese days waiting for higher interest rates on savings accounts is a little like being at the back of a long traffic jam: You can't see what's going on up front, and while you get the sense now and then that things may be ready to start moving, that movement never seems to reach you.
Like a person stuck in traffic, interest rates on savings accounts, money market accounts and other deposits are waiting at the back of a long line. A number of things have to happen before those rates can rise: Job growth must improve, consumer finances have to strengthen, spending needs to pick up and banks need to see more profits from lending and investments.
Over the past couple years, there have been periods of apparent progress in one or more of these areas, but never enough for that progress to make its way back to deposit rates. Recently, there has been yet another sign of possible movement, but it too could prove to be yet another false positive.
Here are a couple examples of the false positives the economy has endured in recent years:
The above seemed like signs that the economy was improving, but these signals were never sustained long enough to prompt a rise in deposit rates.
The latest sign of movement
The latest sign of possible progress by the economy is in housing prices. The S&P/Case-Shiller Home Price Index has increased in each of the last three months. Rising home prices have the potential to boost the economy by improving household balance sheets, and by creating jobs in construction and related industries.
Unfortunately, it is too early to tell whether this housing trend will take root. The housing market has been down this road before: Prices rose steadily from May 2009 to May 2010, only to start another long downward slide, culminating in a new low this past January.
For now, then, savings accounts remain at the back of the traffic jam. There may be some movement ahead, but it's likely a long way off.
The original article can be found at Money-Rates.com:
Stuck in traffic: Savings accounts test depositor patience