A report by the “Wall Street Journal” expected that the volume of deposits in US banks would decrease this year for the first time since World War II.
The report stated that “despite the increase in interest rates, the Bank Analysts They expect deposits to decline by 6% in the 24 largest US banks that make up the KBW Nasdaq Bank Index and have regarding 60% of deposits, with a volume of nineteen trillion dollars.”
The report stated that the increasing inflation leads to the erosion of the value of funds stored in banks, and prompts depositors to search for alternative opportunities to obtain higher returns that preserve the value of their money.
This may be good news because this liquidity from the banks will revive the economy, but the US central bank, which is monitoring the movement of deposits now, may go to raise interest rates more than expected in order to fight inflation.
Expectations of a decline in deposits were not on the table of analysts only two months ago, but February estimates were that deposits would increase by 3%, but then the accounts were changed and regarding a trillion dollars were cut from the estimates.
And the report stated: “In reality, the picture is not as bleak as it seems. American banks have huge deposit surpluses that were formed during the Corona crisis, when people hid the money they received as aid from the government, while companies stored cash to anticipate the risks of the crisis.”
The report stated that there is a 35% increase in deposits for this reason, and regarding $ 5 trillion over the two years of Corona.
The report predicted that the outgoing funds would not constitute a crisis for banks, as the industry has $8.5 trillion more in deposits than loans, according to Barclays analysts.
The report continued: “The beneficiaries of this matter are the investment funds in the stock exchanges and the short-term investments that will most likely go to the money coming out of the banks.”