Saturday, September 13, 2008

What will the November rate be?

With so much anticipation of the new I-Bond rate, people are already trying to figure out what it will be with only 4 of the 6 months of CPI-U data recorded so far.

July's CPI-U of 219.964 already shows a pretty sizeable increase over March's 213.528. A 3.01% CPI-U increase already! If we assume August and September continue the average of March-July, We would see a CPI-U increase of 4.52%.

Even with a 0% fixed rate, the CPI-U increase would cause a 9.04% I-Bond rate! It is unlikely that the August and September CPI-U increases will match the average of the previous 4 months, so it is not likely we will see 9% I-Bonds in November. We will see at least 6.02%, given current numbers.

Given that the CPI-U increase is already higher than the 6 month period for the last rate adjustment, it is very unlikely that the fixed rate will move up from the 0% it is currently.

Hopefully you have some I-Bonds with a non-zero fixed rate as they will be paying quite well in the next period if this inflation trend continues.