Savers are still paying for Fed’s gift to banks

To save the banks from soaring loan losses, the Federal Reserve did what it always does when the industry gets into trouble: Policymakers hacked their benchmark short-term interest rate, which in turn pulled down all other short-term rates, including on savings vehicles.

But this time the Fed went to rock-bottom on rates. In December, the central bank declared that it would allow its benchmark rate to fall as low as zero.

Savers still are paying the price for that gift to the banks. Average rates on certificates of deposit nationwide have continued to slide this year, according to rate tracker Informa Research Services in Calabasas.

The average yield on a six-month CD fell to 1.27% this week, down from 1.86% on Jan. 1 and 2.24% a year ago.

Anyone who has a CD maturing soon should be prepared for serious sticker shock.

Frugal savers are being punished by the Fed's policy of reducing interest rates to near zero. Senior citizens, seeking an alternative to the plummeting stock market, who reinvested their 401k's into IRA's or money market accounts are accruing little or no interest on their balance sheets.