The volume of deposits in US banks fell by a record $ 370 billion

In the second quarter, American banks recorded a record decline in total deposits of individuals and legal entities – they fell by $ 370 billion. Writes about this The Wall Street Journal with reference to data from the Federal Deposit Insurance Corporation. This is the first decline since 2018. The total volume of deposits in banks in the second quarter amounted to $19.56 trillion.

According to the WSJ, despite the significant volume, such a reduction in deposits does not pose a big problem for banks – in just two years of the pandemic, they increased deposits by a record $5 trillion. The reduction in the volume of deposits is due to the repeated increase in the base refinancing rate by the US Federal Reserve. In such conditions, the demand for government bonds is growing, as the payments on them are higher than on deposits.

Back in the spring, many analysts doubted that the rate hike would cause a reduction in the volume of deposits. However, in the end, the increase in the rate turned out to be more significant than expected. The Fed has already hiked interest rates four times since the start of the year, twice in June and July by an uncharacteristically large 0.75%. Many investment bankers and analysts expectthat at the next meeting of the Fed in late September, a decision will be made on a new rate hike by 0.75%.

Yana Rozhdestvenskaya