As the Fed cuts rates, many banks expect funding costs to fall—but the decline often lags. According to this article from Bank Director, many customers have shifted funds from noninterest-bearing accounts into interest-bearing ones, expanding the share of deposits that demand yield. That means even as market rates drop, banks may find it difficult to reduce deposit costs quickly. Meanwhile, fixed-rate assets originated during higher-rate periods can help cushion net interest margins.
Which customer segments (consumer, small business, commercial) are most sensitive to rate cuts in your market? Are your fixed-rate assets helping offset slower declines in funding costs? What signals or triggers will guide you to act more aggressively—or hold steady—on deposit pricing?