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Fed Raises Rates: Banks Cheer, Deposit Gatherers Beware

Today the Federal Reserve raised its benchmark Fed Funds rate by a quarter point, and signaled that the likely path for short-term rates is three more one-quarter point increases in each of 2017 and 2018. Banking industry executives breathed a collective sigh of relief, knowing that at least part of this rate increase will rapidly translate to higher spread revenue and bank earnings. While profitability for deposit gathering business units will rise, we see four clear signs that this rising rate period will be more difficult than prior ones for both Retail and Commercial deposits. Headline Rate Competition: Promotional rate ...

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