Deposit rates have steadily increased for the past six years, but
Rates on long-term deposits have recently dropped by 1 basis point to 4 basis points, according to a report from Moebs Services, an economic research firm. The decline occurred with CDs ranging in maturity from six months to 60 months, according to the report.
This funding makes up 23.8%, or about $2.8 trillion, of deposits. Rates on the remaining $9.3 trillion deposits, such as short-term money and savings, have not changed.
The last decline in deposit rates was in August 2013.
Mike Moebs, CEO and economist at Moebs Services, said in the report that, “This is actually quite substantial because it ends a six-year rise in CD rates. Most notably it signifies a switch in rate direction by the marketplace.”
Banks, CUs, thrifts and fintechs could proceed in lowering long-term deposit rates while maintaining saving deposit rates. But CUs may be the exception, Moebs said. In general, deposit rates are twice as high at credit unions compared with other institutions, he said.
Credit unions are “grabbing as many deposit dollars as they can now” before the Federal Reserve begins to increase rates again, Moebs added.
According to Moebs, long-term CD rates of six months or more are beginning to decline in response to the recent Federal Open Market Committee meeting that maintained the basic Fed Funds rate at 2.40%.
Moebs said that the Fed is the cause of the yield curve inverting, an economic indicator that typically signals a recession. The U.S. yield curve inverted in March for the first time since 2007.
