Correspondent Blog

The July FOMC meeting is complete with no change in rates. Unfortunately, we don’t know much else. If Fed Chair Kevin Warsh’s approach to Federal Reserve communication can be reduced to one operating principle for bankers and borrowers, it is this: expect less help from the Fed in predicting the next rate move.  A quieter…

Fed President Warsh didn’t moved rates today and implied that the next rate move might be up. However, for much of the past year, some loud and persistent voice(s) had insisted that interest rates are headed lower, and a surprising number of market participants have arranged their balance sheets as though that outcome were a…

We might have a divided Congress. Pundits, economists, and the market provide economic forecasts such as GDP, interest rates, inflation, consumer and business demand, loan default rates and banks’ cost of funds.  Unfortunately, people overestimate their competence even in areas where they possess experience and knowledge.  Market forecasts represent the sum of all actors expressing…

In April 2021 we published an article (here) where we argued that the Federal Reserve was overlooking the possibility of serious inflation threats and we questioned the characterization of inflation as transitory.  Shortly after that time we published numerous other articles outlining defensive postures that community banks should take in an increasing inflationary environment, from…

To be a better trusted advisor to your commercial borrowers, one important topic is interest rates in 2026. We recently wrote an article about how the Federal Reserve’s next interest rate move may be up and not down (here).  The aim of that article was not to take a alternative view for contrarian-sake but to…

The dominant market story for 2026 is inflation is cooling, and employment market is uncertain, so the Federal Reserve will keep trimming rates until policy looks comfortably “neutral.”  But the current evidence points to a less comfortable possibility: the Fed may be done cutting for a while, and if inflation risk re-accelerates or employment levels…

Central bank independence is currently, and has long been, considered a cornerstone of economic stability in advanced economies. The Federal Reserve (Fed) is established by Congress with a dual mandate of maximum employment and price stability. Its structure is designed to resist direct political pressures. Yet, in 2025, the Fed faces its greatest institutional challenge…

Bankers should consider the shape of the yield curve when structuring, marketing, and pricing loans to maximize return and reduce risk.  The shape of the yield curve can also help lenders understand borrowers’ needs and better position the bank against competitors. Definition of The Yield Curve A yield curve plots interest rates with different maturity…

For decades community banks bolstered ROA/ROE by booking 5-year fixed-rate term loans funded with short-term deposits – called a carry trade.  The carry trade has historically worked for banks because interest rates were in a long-term pattern (approximately 40yrs) of decline prior to the pandemic, resulting in improving NIM for most banks. What some bankers…

Through most of 2025, the Fed Funds futures market has been predicting multiple imminent interest rate cuts by the Federal Reserve. Many banks have bet their budgets on a lower cost of funds and better credit performance. While this market was consistently forecasting rate cuts just a few months in the future, those cuts did…

Many bankers are struggling to analyze the current business environment and need help predicting the future.  Community bankers are especially concerned about economic forecasts such as GDP, interest rates, inflation, consumer and business demand, and default rates.  The difference between a good decision and a bad one may not lie in spreadsheets or economic charts…

“Liberation Day” brought a 10% baseline tax on all imports plus a 15% to 49% tariff rate on a defined set of nations (below). The move shook the markets, threatening to upend much of the architecture of the global economy and fueled broader trade wars. The recent uncertain shifts in trade policies, particularly increased tariffs…