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Beta Prep
Beta Prep
July 20, 2022 Beta Preparation By Michael Young

Two things have remained consistent since the start of the pandemic – uncertainty and speed. As the Federal Open Market Committee (FOMC) combats inflation by rapid tightening with the historic rate increases and pace garnering greater publicity, deposit customers are beginning to seek more attractive yields.

Despite many members currently holding ample deposits/shares at a low cost and historically lagging the Federal Funds rate, the speed and amount of the rate increases is a game changer making it harder to lag rates.

If you haven’t started, now is the time to prepare and develop sound deposit strategies to combat further margin compression. Based on prior rising rate environments, overall deposit betas range from 40 to 60 percent of the change in the Federal Funds rate as illustrated in the graph below.

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Michael Young
Michael Young Michael Young is Senior Marketing and Member Solutions Officer at FHLBank Topeka. Michael joined FHLBank in 2012. He worked in our Accounting and ERM areas before joining Lending and now, Member Solutions. He is a graduate of Washburn University. Contact him today.
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