Deposit Rates Forecast for 2024

GECU Voices brings you guidance and insight from experts within the Credit Union. Today’s Q&A features Dan Vonderhaar, Chief Financial Officer. 

Deposit rates are the interest rates offered by financial institutions—like General Electric Credit Union (GECU)—to depositors who store money in money market accounts, certificates, or similar accounts. These rates determine the return you’ll earn on deposits. Certain factors can cause rates to go up or down. We’ll walk you through what those factors are and where deposit rates are expected to go in 2024. 

Q: Can you introduce yourself to our readers? 

Dan: I am the Credit Union’s Chief Financial Officer. I’ve been in the financial services industry for 30 years, spending most of that time as a chief financial officer at different institutions. In my role at GECU, I’m responsible for balance sheet management, which includes rate setting for deposits and loans. 

Q: What key factors influence deposit rates?  

Dan: There are many different types of deposit accounts. A certificate allows depositors to earn a fixed rate over a fixed term that may be as short as a few months or as long as a few years.

Rates for a savings account or a money market account, which have no term limits, can change overnight. Compare this to a lending product like a mortgage, which might have a fixed rate but for 30 years. That’s a longer-term rate. For this reason, deposit rates are typically referred to as short-term rates.

The Federal Reserve, or the Fed, uses these short-term rates to help control inflation and employment. If inflation is increasing, they’ll increase short-term rates in tandem to tamp down inflation. Given that deposit rates are typically short-term, the Credit Union’s deposit rates are impacted by what the Fed does.   

Our competition also influences our deposit rates. We’re all competing for the same liquidity and the same deposit dollars out there, so market competitiveness comes into play as well. 

Q: As of now, are deposit rates expected to increase or decrease in 2024? 

Dan: Nobody really knows the answer to that question—including the Fed. Inflation is not quite as high as it was, but we still have inflation. The Fed looks at several key inflation measures, and those measures continue to be a little higher than they want to see. They don’t want to lower rates too soon. 

However, the next move should be to lower rates—it’s a matter of when. Originally, they thought rates would come down in March, then it changed to May, now it’s been pushed out to late summer. That’s the best forecast we have. Once they start lowering rates, later this year perhaps, they’ll lower rates in succession for the next several meetings to get short-term rates back to more normal, historical levels. That, mixed with the competition, will directly impact the Credit Union’s deposit pricing. 

Q: What would you say to members who are worried about decreasing deposit rates? 

Dan: When I say rates are going to go down, they’re not necessarily going to go down significantly. If you don’t need immediate access to funds, you could even open a longer-term certificate that will stay at that rate no matter what the Fed is doing—it’s fixed for whatever the term is. 

If rates are coming down a little bit, that also means inflation is coming down. Your savings rate should always be compared to inflation. If the savings rate is above the inflation rate, you’re still making progress. By earning more than the inflation rate, you have more buying power. 

Q: Aside from a great rate, what else should someone look for in a savings account option? 

Dan: Depending on your specific financial situation you may need access to those funds. In that case you would want a Thrive Money Market Account. You can withdrawal funds without penalty. Versus a certificate, which is ideal if you know you’re not going to need the funds and you want to lock in a rate today—especially if you think rates are going to go down. If you do, just know that you must keep the funds in the certificate until its term ends. Withdrawing them early will incur penalties. Ultimately it depends on what you anticipate your needs to be relative to those funds. 

Another consideration would be safety. Bank funds are often covered by the Federal Deposit Insurance Corporation (FDIC) while credit union funds—GECU’s included—are covered by the National Credit Union Share Insurance Fund (NCUSIF) that is administered by the National Credit Union Administration (NCUA). Generally speaking, your deposited funds are covered up to $250,000 through the NCUA. That can be important when members consider other investment options that some of the investment banks offer. Some may offer money market accounts that sound similar to our Thrive Money Market Account. But theirs may not be insured. That insurance is worth something and should be considered when you make your choice. 

Q: What are the benefits of banking with a credit union to grow your balance?  

Dan: Credit unions are not-for-profit entities. They don’t have to answer to shareholders. Credit unions are more member-oriented because of that. There’s no expectation of generating any sort of significant profit. Credit unions can be more generous in that regard. We try to offer more preferential rates—whether that be lower loan rates or higher deposit rates.

Interested in opening a deposit account that grows your balance? Compare rates online or schedule an appointment with a team member to go over your options in greater detail.