CSBJ Daily

Banks are not dropping interest rates in lock-step with the Federal Reserve Bank’s reduced interest rates.

Rick Barham, CEO and founder of Market Rates Insight, said that after seriously adjusting interest rates downward during January, banks are slowing rate reductions during February in an attempt to solicit new deposits from consumers and stay competitive.

“Things are calming down, and banks are paying less attention to the Fed and turning to the market to bolster their deposits,” Barham said.

Since banks compete with investment brokers and other institutions for consumer savings, rather than following the Fed, banks are opting to keep interest rates higher for both deposits and loans – in order to appeal to the retail market and maintain spread, he said.

“It’s interesting that CDs seem to be making a rebound. So banks are more comfortable marketing term accounts – CDs, versus non-term – high-yield savings,” Barham said.