One question keeps coming up lately: if the Fed raises rates, why aren’t CD rates moving at every bank?
I understand the frustration. People see loan and mortgage rates getting more expensive, then look at the rate on their savings or CD and feel like the bank is moving quickly when it benefits the bank, but slowly when it benefits the customer.
The reality is that banks do not automatically raise deposit rates simply because the Fed changes its target rate. A bank raises CD and money-market rates when it needs deposits, wants to compete for new money, or sees customers moving funds elsewhere. If it already has enough deposits, it may not feel pressure to pay more right away.
That is also why two banks in the same town can be offering very different rates at the same time. One may be comfortable with its deposit base. Another may be actively trying to bring in cash and willing to pay more for it.
Mortgage rates add to the confusion. They are influenced by more than the Fed—longer-term bond markets, investor expectations, and the cost of funding loans all matter. So it is possible for borrowing costs to rise while a local bank leaves its CD rates unchanged.
The practical takeaway is simple: loyalty should not mean ignoring the market. Before renewing a CD automatically, check what is available locally, read the minimum and membership requirements, and ask your institution whether it can offer something more competitive.
A higher rate is not always worth moving money for. But neither is accepting a renewal rate without looking around first.
— Arthur McDaniel