Bank Deals Blog: Fed / Banking News

The outcome from last week’s FOMC meeting suggests that we won’t see a Fed rate hike for a very long time. In its policy statement, the Fed included new inflation language that describes the general timeframe for how long the near-zero rates will last:

If inflation rises inline with the Fed’s current expectations, it’s unlikely the Fed will hike rates until well after 2023. This is based on the updated Summary of Economic Projections (SEP) that the Fed released after its meeting last week. The SEP shows that the majority of...

The two-day FOMC meeting began today. The meeting statement is scheduled for release at 2:00pm EDT Wednesday. In addition, the update to the Summary of Economic Projections (SEP) should also be released. At 2:30, Fed Chair Powell’s press conference should begin.

We will likely see some minor modifications to the meeting statement to reflect the Fed’s new inflation strategy in which they plan to maintain policy to keep the inflation average at its 2% target. Unlike in the past, this will likely result in the Fed keeping rates near zero for...

Note regarding the CD rates summary: Since Monday was a holiday, the CD rates summary will be delayed until Wednesday. This will allow us to better capture rate changes that occur on Tuesday.

Another FOMC meeting is scheduled for next week (Sep 15-16). That meeting will include an update to the Summary of Economic Projections (SEP). The last SEP update came after the June meeting. The most interesting projections for savers is the dot plot that lists FOMC member projections of the target federal funds rate. In June, none of the...

Last Thursday, the Fed officially announced an update to its policy strategy. This coincided with a speech delivered by Fed Chair Jerome Powell at the annual Jackson Hole conference which explained the change. The new policy strategy is generally known as average inflation targeting, and Fed Chair Powell summarized it as follows:

Unfortunately for savers, this might mean that rates will stay low for a longer time. From 2015 to 2018, the Fed decided to raise interest rates even though inflation never reached above its 2% target for any period of...

There are some signs that point to a faster-than-expected recovery. The faster the U.S. economy recovers, the sooner deposit rates will rise. However, even if we do see a very strong recovery, the Fed will be in no rush to hike rates. Fed Chair Jerome Powell is scheduled to speak virtually on Thursday at the Fed’s annual Jackson Hole conference. He’s expected to provide more details on the Fed’s plans to allow inflation to run above its 2% target for a period of time. This is called “average inflation” targeting,...

By the look of the stock market, it doesn’t appear that there’s going to be a long recession ahead. Today, the S&P 500 reached an intraday record high. Even without a new round of fiscal stimulus from Congress, investors appear to see other reasons for optimism. There has been some positive economic news. Initial unemployment claims fell below 1 million last week. Also, there have been better-than-expected second-quarter corporate earnings reports.

You have to wonder if another stock market bubble is building as the pandemic continues to suppress the economy. If...

The July jobs report that was released last Friday was another report that topped economists’ expectations. The Labor Department reported 1.76 million jobs gained (higher than the consensus of 1.48 million) and an unemployment rate that fell to 10.2% (lower than the consensus of 10.6%). This shows that the economy is on the road to recovery, but it also shows that it may be a long road. As described in this CNBC article:

The COVID-19 resurgence has slowed the recovery, but there are signs that we should see continued improvements as...

Last week’s FOMC meeting and press conference by Fed Chair Powell further reinforced the long road ahead of near-zero rates. Fed Chair Powell explained that even after the pandemic is over, it could take years for the unemployment rate to fall back to the pre-pandemic rate. Even when that does occur, the Fed will be in no rush to hike rates. More reports have come out that point to the Fed being willing to accept inflation running above its target for a while before deciding to hike rates. According to...

The two-day FOMC meeting began today. The meeting statement is scheduled to be released at 2:00pm ET Wednesday followed by a press conference by Fed Chair Jerome Powell at 2:30pm ET. There will be no updates to the economic projections in this meeting. No policy changes are expected so it should be an uneventful meeting for savers. The tone of the FOMC statement and the press conference may be more dovish than the last meeting since there has been a resurgence of COVID-19 cases in many parts of the nation....

The next FOMC meeting is scheduled for next week (July 28-29). Now that the federal funds rate is back at the zero bound, these Fed meetings will likely be mostly uneventful for savers for quite some time. The recent resurgence of COVID-19 cases suggests that the economic recovery will be slow. The FOMC meetings should provide a useful overview of how the recovery is progressing. Once the pandemic is behind us and the economy is in full recovery mode, I’m afraid the Fed will likely be slow in tightening policy...