Deposit Competition Will Intensify... Are You Prepared?
The FOMC increased the Fed Funds rate by another 75bps last week for a total of 150bps over the last three months, the most aggressive initial tightening pace since 1980. The market expectation is that the Fed Funds rate will continue to rise toward 4%. These aggressive rate moves have bankers concerned that deposit pricing will move even faster than originally anticipated, despite the glut of liquidity in the system.
According to DCG’s Deposits360°® forecasting model, coupled with discussions with clients across the country, financial institutions have exhausted their ability to lag deposit rates any further. In fact, if FOMC continues to push the Fed Funds rate higher we would expect deposit costs within the industry to begin to rise faster than they have in over 15 years.