American savers are missing out – because bank interest rates are trailing the Fed's benchmark by a record amount
The interest rates that banks pay on customer deposits are lagging the US central bank's benchmark by a record amount, its economists said in a new paper.
The benchmark was 4.5% as the year closed, suggesting customers were getting around 2.2% average return on their deposits. They totaled $18 trillion at the time. The Fed has lifted borrowing costs from near-zero to just below 5% over the past year in a bid to tame decades-high inflation. But ordinary lenders have struggled to keep up with the breakneck pace of its tightening campaign, the analysis found.money-market fundsAssets in money-market funds hit a fresh high of $5.25 trillion last week, according to data from the.
"Hence, banks are facing significant competition for savers from other vehicles that offer rates closer to the fed funds rate, such as money-market mutual funds," they added.
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