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Bank Deposit Rates Haven't Kept Pace with Yields on Other Investments, but Depositors Are Staying Anyway

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Abstract

Bank deposit outflows continued during 2023 despite rising deposit rates. One possible explanation is that deposit rate increases have not kept pace with rising yields on other investments. For example, spreads between bank deposit rates and yields on deposit substitutes such as money market funds have reached historically high levels. Although the outlook for deposit rates depends on the policy rate path, deposit levels are likely to remain stable under alternative policy scenarios.

Suggested Citation

  • Chris Acker & W. Blake Marsh & Padma Sharma, 2024. "Bank Deposit Rates Haven't Kept Pace with Yields on Other Investments, but Depositors Are Staying Anyway," Economic Bulletin, Federal Reserve Bank of Kansas City, pages 1-4, February.
    • Handle: RePEc:fip:fedkeb:97758
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    References listed on IDEAS

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    1. Itamar Drechsler & Alexi Savov & Philipp Schnabl, 2021. "Banking on Deposits: Maturity Transformation without Interest Rate Risk," Journal of Finance, American Finance Association, vol. 76(3), pages 1091-1143, June.
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