Sharply higher inflation has brought the prospect of much higher, and fast-rising interest rates. Financial institutions will find that they must sometimes pay up for deposits they already have in order simply to retain key business and consumer customers.
This was the consensus of a panel of experts from Curinos discussing bank deposits in an unusual economic environment. While there have been periods of rising rates in the experience of the present generation of bankers, few have faced that to the degree the panelists expect to see. Going forward the Federal Reserve is expected to make more increases more frequently than anticipated, but also, potentially, in bigger steps — half-point increases in some cases rather than quarter-point hikes.
Bankers face multiple conundrums in dealing with these factors. They will have to confront these choices even if they are flush with deposits now, said Curinos experts, because the challenges will run several years.
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