NY Fed, Report: Deposit Betas, Up, Up, and Away?

“Deposit rates continue to lag the fed funds rate, but the pass-through of policy rates is quickly approaching levels not seen since the early 2000s. The rapid rise in rates has resulted in a fall in overall deposit balances, a tightening of funding ratios, and an increase in non-deposit borrowing. Banks have been managing the deposit runoff using more attractive time-deposit rates and other borrowings. Given the increase in fed funds rates since 2022:Q4 and the wide gap between deposit rates and the fed funds rate, we expect that deposits will continue to shift into higher rate categories that are more responsive to monetary policy.”