Ask the expert: Will bin Laden's death affect savings and money market rates?
May 06, 2011
Q: What impact will the elimination of Osama bin Laden have on economic affairs, and will this trickle down in any way to affect rates on savings accounts, etc.?
A: The killing of Osama bin Laden is a major event in world affairs, and thus you might expect it to have some impact on finance and economics. However, the news has had a fairly muted impact on the financial markets, and seemed merely to compete with more mundane economic news for the attention of those markets.
Whenever the Middle East is concerned, any economic impact is usually manifested primarily though oil prices. Those prices also are a hot button for customers in savings accounts and other deposit vehicles, because inflation is such a threat to those deposits - especially with CD, savings, and money market rates at ultra-low levels.
In terms of the death of Osama bin Laden, the impact on the price of oil has been understandably mixed. For one thing, the relief at eliminating the world's most prominent terrorist is tempered by concern over acts of reprisal. In fact, terrorism itself can have differing impacts on oil prices. Violence in the Middle East can disrupt the oil supply and thus drives prices lower. Major terrorist acts in developed countries can interrupt economic activity, and thus push oil prices lower due to weakened demand.
In this context, it makes sense that the reaction of the oil market so far has been to see fluctuations up and down in price, but no sustained move in either direction. This shouldn't have any net effect on savings accounts.
Financial markets are prone to overreact to news events, but in this case they seem to be taking the news of bin Laden's death appropriately in stride. As important an event as it was for justice, the impact should not be far-reaching enough to affect CD, savings, and money market rates.
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