Bank Deals Blog: Fed / Banking News

Note regarding the CD rates summary: Since today is the first day of the month, the CD rates summary will be delayed until Wednesday. This will give me time to include new-month rate changes into the CD summary.

With only one month remaining in 2020, can 2021 be any worse for savers? There are reasons for savers to be optimistic that 2021 may actually be better. Even though the current surge in COVID-19 cases may result in near-term economic disappointments, the medium- and long-term economic outlook appears to be much brighter....

Tuesday was another record day for the stock market. Both the Dow and the S&P reached record highs. Vaccine optimism contributed to these gains. Also helping the gains was the news that President-elect Joe Biden had selected former Fed Chair, Janet Yellen, to be the next Treasury secretary.

Even with the recent surge of COVID-19 cases, signs are pointing to the continuation of the economic recovery. The concerns that there might be a double-dip recession are falling. Economist Tim Duy described recent good news in the housing market in his FedWatch...

Yesterday was another Monday with reports of successful COVID-19 vaccine test results. Like the 9th, the news drove the stock market to record highs. In a virtual speech today, Fed Chair Powell warned that the recovery still has a “long way to go” even considering the positive virus news:

Once the pandemic ends, the Fed will likely be very slow in transitioning to a new policy of rate hikes. With the Fed’s new inflation strategy, it may take more than a year of inflation running above the Fed’s 2% target. Last...

The news on Monday about the successful COVID-19 vaccine results drove the stock market to record highs. The news also drove Treasury yields higher. COVID-19 is hanging around longer than many had expected and that has been dragging down the economy. There are hopes that a successful vaccine may finally put an end to the pandemic and the resulting economic drag. At the Fed meeting last week, Fed Chair continued to highlight the pandemic’s impact on the economy:

Not much came from last week’s Fed meeting. No interest rate changes...

The markets didn’t seem nervous about the fate of today’s election. The stock market ended the day higher, and the 10-year Treasury yield reached a 5-month high. It appears that investors are seeing increasing odds that a major fiscal package will pass after the election that will give a boost to the economy. Investors don’t seem to be focusing on the long-term economic consequences from today’s election. It’s going to take a long and sustained economic recovery before the Fed even starts to think about rate hikes. Let’s hope the...

The Fed’s second to last FOMC meeting of the year takes place next week after the election. The FOMC statement is scheduled for release on Thursday (November 5th) with a press conference by Fed Chair Powell soon after. The meeting will likely be uneventful, but the Fed should at least provide an update on its view of the economic recovery.

At next week’s FOMC meeting, the Fed will likely reiterate its warnings regarding COVID-19 by saying that the “path of the economy will depend significantly on the course of the virus.”...

Based on the recovery from the Global Financial Crisis and the seven years that the Fed held rates near zero, one might assume that the recovery from the pandemic may take a similar slow course. However, there have been signs that it will be different. Federal Reserve Vice Chair Richard Clarida gave a virtual speech on Monday at the American Bankers Association Convention in which he described the unique aspect of this year’s recession:

The latest data showing that a strong recovery is underway is from retail sales. Last week, Reuters...

It’s well known that today’s low rates have come from the economic recession that the pandemic caused and the Fed’s response. However, there’s another important factor that has put downward pressure on deposit rates. Banks have been flooded with deposits as loan demand has diminished. Last week this Bloomberg article described the condition in the banking industry. Deposits at the largest banks have surged by $1.3 trillion since the pandemic began, and most of those deposits are not being used for loans. Instead, banks “have channeled that money into growing...

The September jobs report that was released last Friday showed that the unemployment rate fell to 7.9%, which was lower than the consensus rate of 8.2%. The unemployment rate has steadily been falling since the April jobs report when the unemployment rate was at 14.7%, and the rate has consistently fallen more than what economists have expected.

Unfortunately, the September jobs report shows that the economy still has a long way to go, as this WSJ article explains:

A few new insights into the future economic challenges were provided in a speech...

Last week, Fed Chair Jerome Powell gave testimony before House and Senate committees. He provided the warning about the economic recovery that we’ve seen several times:

However, Fed Chair Powell did acknowledge that there have been many recovery signs in the economy:

Those economic recovery signs were noted by St. Louis Fed president James Bullard. In a speech last week, he made the case for optimism in the economic forecasts. According to Bullard, the “U.S. economy is within reach of a nearly full recovery by the end of the year.”