Telis Demos

speaker

656 appearances 10 recordings 1 series first heard Jun 2018 last heard Dec 2024

Telis Demos’s voice in public audio — every appearance, attributed to the second.

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WSJ Your Money Briefing · Lower Interest Rates Likely to Curb Banks' Earnings · 16 Jul 2019 podcast

Banks can charge more for those loans, right? voice-verified

So most consumers know that when the Fed raises interest rates, they get a letter from their credit card lenders saying the prime rate has gone up by 25 basis points. voice-verified

Therefore, your rate has gone up by 25 basis points. voice-verified

On the other hand, the bank pays you money to deposit with them. voice-verified

that rate is a little bit less tied directly to what the Federal Reserve does. voice-verified

That rate is really set essentially by the market, by what consumers demand and what banks can get away with. voice-verified

And for a long time, of course, consumers demanded virtually nothing because that was what banks were offering. voice-verified

The bank had very little incentive to offer more because the Federal Reserve was keeping rates pretty low. voice-verified

So consumers really didn't have much choice. voice-verified

Nowadays, consumers seem to have much more choice when it comes to where to deposit money. voice-verified

They can put it in a high-yield savings account. voice-verified

They can put it into a money market account. voice-verified

These are all sort of either cash or cash-like investments that pay more interest. voice-verified

So banks are facing the prospect of paying out a little bit more in interest. voice-verified

So when the Federal Reserve stops raising rates, a couple of things happen. voice-verified

One is that they are no longer passing along those rate increases to the people that are borrowing from them, right? voice-verified

So you stop getting that letter from the credit card company saying your rates are going up. voice-verified

However, banks are a bit reluctant to lower the rate that they are paying you on your deposits lest you take your deposits across the street. voice-verified

And so in that sense, banks get squeezed. voice-verified

So some banks have already responded by lowering the rates that they pay on their savings account. voice-verified

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