Many conservative investors who invest in certificates of deposit (CD’s) are starting to wonder if CD interest rates are going to back up towards their pre-recessionary levels. This is a fair question to ask because according to the BankRate.com’s CD interest rate page, current CD interest rates are ranging from 0.99% to 1.75% for one-year CD’s to 1.94% to 3.49% on five-year CD’s. This range makes one wonder if CD interest rates will ever go back up to near their pre-recession levels.

Since no one can tell for certain over the long haul, here is a prediction about what might happen to CD rates in the next six to twelve months.

In the next six to twelve months, conservative investors who invest in certificates of deposit that mature in five years or less will continue to see flat CD rates that pale in comparison to pre-recessionary CD rates. This is the case because according to a blog post dated November 13th 2009 located at The Wall Street Journal’s blog site (http://blogs.wsj.com), most Federal Reserve analysts believe that the economy has not completely recovered from the current recession.

As a result of the Fed’s belief that the economy has not fully recovered from the current recession, it will not stop its “easy money” or “accommodative” monetary policy that is designed to promote spending and investment in the public sector. As a result, we will continue to see the Fed’s open market interest rate stay near 0% to 1% until the economy improves to such a point that higher interest rates can be sustained in the economy. As it stands now, the economy is still too fragile to warrant higher interest rates on the open market.

This does not bode well for CD rates in the next six to twelve months because most CD rates are tied directly to the Fed’s open market interest rate. As a result, there is no incentive for banks to raise CD rates to higher levels until the Fed decides to raise its open market interest rate from its currently rock bottom levels.

If you are looking to invest now, do not lock in your money for more then a two years. Rates should be on the rise by then.