"This Year’s US Bank Deposits Expected to Decline for the First Time Since WWII"

[Asia Economy New York=Special Correspondent Joselgina] For the first time since World War II, there is a forecast that deposits at major U.S. banks may decline this year.

The Wall Street Journal (WSJ) reported on the 10th (local time) that deposits at 24 banks comprising the KBW Nasdaq Bank Index are expected to decrease by 6% this year. Such a decline was unthinkable just a few months ago. During the pandemic period, U.S. bank deposits increased by 35% over the past two years.

Until February, the scale of bank deposits this year was expected to increase by 3%. However, analysts have since lowered deposit forecasts by more than $1 trillion.

WSJ reported that banks have little incentive to attract deposits, so despite the rise in the benchmark interest rate, deposit rates remain at low levels.

However, banks have secured sufficient deposits needed for additional lending, so a decline in deposits is not expected to reduce profitability. U.S. banking is already understood to have $8.5 trillion more in deposits than loans.

So far, banks have been considered the biggest beneficiaries of gradual and systematic interest rate hikes. This is because they can maintain near-zero deposit interest rates while raising loan interest rates, improving historically low profits.

WSJ also emphasized that MMF rates are rising due to the Federal Reserve's (Fed) interest rate hike policy. This could trigger a shift of funds from deposits to MMFs.

This content was produced with the assistance of AI translation services.