Outlook for Other Interest Rates

With the Fed’s decision on Wednesday to keep its key short-term interest rate at 6.5%, here’s a look at what may happen with other lending and investment rates in the near term:

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Item: Prime lending rate

Current rate: 9.50%

Change since previous Fed hike (May 16): no change

Outlook: Banks boosted the prime in tandem with the Fed’s half-point rate hike on May 16. With the Fed on hold, the prime should be as well.

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Item: Money market mutual fund average yield (seven-day)

Current rate: 6.08%

Change since previous Fed hike (May 16): +0.45 pts.

Outlook: True to form, money fund yields have tracked the Fed’s last move, rising nearly a half-point since May 16. But fund yields should stabilize soon-unless the economy reignites.

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Item: 1-yr. CD yield (U.S. avg.)

Current rate: 6.36%

Change since previous Fed hike (May 16): +0.72 pts.

Outlook: CD yields took a big jump after the last Fed hike, but the rate of increase has slowed recently. Don’t expect another surge soon.

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Item: 30-year mortgage rate (Freddie Mac)

Current rate: 8.14%

Change since previous Fed hike (May 16): -0.38 pts.

Outlook: Long-term bond yields have dropped in recent weeks, anticipating that the Fed would pause. That has pulled mortgage rates down. Now it all depends on whether the economy really is slowing.

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Note: Money fund and CD yields are compound yields.

Sources: Imoneynet.com; Times research