The Dynamics of Interest Rates and Bank Competition

The Federal Reserve has been raising benchmark borrowing rates at the fastest pace in decades, but the interest rate paid out to millions of people with bank accounts is still stuck at almost zero. According to data from Bankrate, the average interest rate on savings accounts is just 0.23%. So what's going on? Why have many banks so far avoided raising what they pay out to depositors even as the Fed hikes, and will that eventually change? What does it mean for the financial system and also economic policy given that higher rates are, in theory, supposed to encourage less spending and more saving in order to curb higher inflation? On this episode, we dig deep into the making of bank deposit rates with Barclays strategist Joe Abate.

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