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Fed Moves Again: Rates Continue to Lag, but Pressures are Clearly Emerging

Today the Federal Reserve raised the Fed Funds rate another 25 bps as expected — the fourth increase since 2015 and the third in a more recent series of moves. To date, banks are enjoying relatively low betas across Commercial and Retail deposit portfolios. Our ongoing proprietary data and metrics illustrate emerging pressures in Commercial, where “exception” pricing is moving toward the “norm,” as well as in Retail, where the marginal Cost of Funds is increasing sharply for promotional-oriented players. THE VIEW FROM COMMERCIAL Banks Holding the Line on Pricing Deposits grew tremendously in the decade following the financial crisis, ...

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