After two and a half years of the Fed's “prolonged high interest rate” policy, US banks have reportedly collected more than $1 trillion.
The high interest rate system has allowed thousands of U.S. banks to earn higher yields on their Fed deposits, according to data from the Federal Deposit Insurance Corporation (FDIC). report Financial Times.
And while many analysts and market observers thought banks would pass on a significant portion of the high interest rates to customers, that hasn't happened.
In the second quarter of 2024, when the Fed was paying banks 5.5% on deposits, savers earned an average annual interest rate of 2.2%, according to regulatory data that includes accounts that don't pay interest.
At JPMorgan Chase, depositors received only 1.5% per year in interest, while Bank of America depositors were charged 1.7% per year.
Lower interest rates for depositors provided banks with an additional $1.1 trillion in revenue, equivalent to about 66.67% of the interest paid by the Fed over the past two-and-a-half years. Meanwhile, savers received just $600 billion.
After the Fed lowered interest rates this month, some large banks moved to further reduce the interest they pay wealthy depositors, with JPMorgan and Citi announcing 50 basis points cuts in line with the Fed's own actions.
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