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Although the U.S. Federal Reserve will raise interest rates this year, banks are unlikely to raise interest rates on savings accounts or CDs, The Wall Street Journal said.
Banks just don’t need to offer higher returns to attract more money.
During the COVID War, the U.S. savings rate reached near-record levels, padded by government stimulus checks.
Deposits at American commercial banks now sit at $18.1 trillion, compared to $13.3 trillion as 2020 began, the WSJ said.
Instead of rewarding savers with higher rates, banks are expected to use their growing revenue to invest in their operations and revive their profit margins.
Banks skimped on both in recent years.
Interest rates on loans were low before the COVID era; then the U.S. Federal Reserve sank rates close to zero in March 2020 when much of the commercial lending market collapsed.
As a result, savings accounts at U.S. banks paid an average interest of 0.06 percent at the end of 2021, the WSJ noted. Returns on so-called high-yield accounts were paying about 1.5 percent two years ago; now the average is 0.5 percent, a two-thirds reduction.
Now banks are reporting an increase in loan applications during the last three months of 2021, a trend they see continuing—and boosting their revenue.
However, “you’re not going to see [interest banks pay on deposit accounts] jump with any sort of magnitude until banks have many more loans on the books than they do today,” Peter Gilchrist, in charge of retail deposits for banking consultancy Curinos, told the WSJ.
Banks operate, and book profits, in the space between what they charge borrowers and what they pay depositors.
Waiting for interest on savings accounts to increase “will be a long haul,” chief analyst Greg McBride at Bankrate told The New York Times.
Small and online banks are likely to raise rates on deposits sooner than large national banks, he said.
TREND FORECAST: Once again, the “too big to fail” banksters cash in. Another case of “trickle-down economics,” in which Bigs pay themselves first and Slavelandia’s plantation workers get the leavings.