As the US Federal Reserve has raised interest rates at the fastest pace in decades, savers have been expecting to see those increases appear via higher yields on their bank accounts. Money-market mutual funds have been more generous than the banking sector in raising the rates paid on savings, however. This disparity, which has become more pronounced in the wake of regional bank turmoil earlier this year, involves what’s known as deposit beta.
It’s a measure of how much of the Fed’s monetary policy is trickling through to the deposit market — primarily banks and money-market funds. The cumulative interest-bearing deposit beta was roughly 0.4 at the end of 2022. That means that, of the 3.75 percentage points of interest-rate hikes in 2022, banks on average passed along about 40% of the benefit to customers in the form of higher deposit rates.
Read More : Why Banks Must Enhance ‘Deposit Beta’ to Meet Market Demands