Correspondent Blog

There appears to be some complacency regarding the Federal Reserve’s monetary policies in 2021 and 2022. The ten-year Treasury, around 1.35%, may be sending a short-term signal on liquidity versus a long-term prediction on inflation.  Community bankers need to factor in the high probability (50% to 75%) that tapering will start in 2021 and not…

The Treasury market is definitely trading like the best days of the economic recovery may have already past. The latest clue to that is the ISM Services Index for June posted a 60.1 which indicates an expanding sector but it disappointed against a 63.5 expectation and 64.0 print in May. Higher prices, it seems, are…

The reality is bankers are fantastic problem solvers. It’s in their blood. The problem is that, as an industry, we leave much to be desired about DIAGNOSING the right problem. Present a challenge to a banker, and they will quickly switch to solution mode without first analyzing what the issues are. They don’t fully understand…

We have published multiple articles, economic bulletins, and podcasts on inflation (including here and here).  In this article, we will not make a case for or against the market’s expectation of inflation.  We will assume current gauges such as CPI and PCE accurately reflect the current inflation environment (many arguments can be made for why…

Personal Income and Spending Numbers Finish the Week This morning we get personal income and spending numbers for May and while those will certainly get some attention, the inflation numbers in the report will also get their fair share of scrutiny. The income and spending numbers have been buffeted in the last few months from…

The Fed leadership always prefers a unified picture of its members to its policies. Sometimes, however, some skirmishes break out over those policies and other desired directions and I think we are in the midst of such a time.  The Fed governors are still very wedded to the idea of the recent inflation thrust as…

After talking about the role of bank product managers (HERE), many bankers and bank board members asked the question – How do you know when to start a new product? This article covers seven rules that form our framework for when banks should consider either building or buying a new product. The Rules will help…

The average commercial loan term for amortizing credit facilities at community banks is between four and five years. Banks need to understand the optimal loan term for amortizing credits to maximize profit and minimize risk. We analyzed the average community bank’s preferred loan term based on risk (probability of default, loss given default, and expected…

Fed Speak and Another Inflation Number This Week After the FOMC meeting last week—and its two hikes in 2023 scenario—put some volatility into markets, investors will be eager to hear more from Fed officials this week to gain additional color on their thinking. With nine Fed officials set to talk this week we will get…

Did the Fed Just Blink on Inflation? In a stare down contest did the Fed just blink at higher inflation and hence take the edge off their new policy framework? That seems to be the takeaway from all that they delivered on Wednesday afternoon.  Recall the new policy framework they unveiled at Jackson Hole last…

It’s FOMC Day and we delve into more detail below what we think comes of this meeting. This is one of those quarterly affairs where the Fed updates its economic and rate projections and those often provide more insight than the carefully-crafted statement and heavily-scripted post-meeting press conference. Suffice it to say, we think Chair…

If you ever wanted to know the most popular strategic planning initiative for a bank over the last three years, it is this one – generate more non-interest income. An estimated 30% of banks have this as their focus. The funny part is that despite this being a major conversation and the source of many…