Fed Freezes Interest Rates ... For Now

It was expected to be a pause. Is it now looking more like a “skip”? That’s the word Fed Chair Jerome Powell used Wednesday—before immediately correcting himself—while announcing the decision to keep interest rates where they are, for now. This is the first month the Fed has left rates unchanged since March 2022, but at least two more rate hikes are now expected before the end of 2023, and rate cuts do not appear to be on the horizon. The signal is clear: More work needs to be done to rein in inflation.

Debt Deal’s Bank Impact: Also Wednesday, Powell stated that efforts to replenish government funds post-debt ceiling deal may result in deposits being drawn out of the banking system. But Powell added that as the Treasury issues $425 billion of short-term securities this month, the Fed will monitor markets to prevent destabilization—and that he does not foresee related liquidity issues for banks.

New POV on ROV: Five federal regulatory agencies have requested public comment on proposed guidance regarding reconsiderations of value (ROV) for residential real estate transactions. This guidance aims to address risks linked to deficient valuations and demonstrate how financial institutions can integrate ROV processes into their risk management functions while complying with applicable laws and regulations. The guidance also offers examples of policies and procedures that institutions may adopt to identify, address, and mitigate discrimination risks impacting residential real estate valuations.

Trust Call: The OCC seeks public input on a proposed annual trust survey to measure and track public trust in banking and bank supervision. The OCC aims to use the survey results to identify areas for trust enhancement and inform policymakers, bankers, and researchers about trends and drivers of public trust in the banking sector. Acting Comptroller of the Currency Michael J. Hsu said when the public trusts banks a “virtuous cycle” results. “Customers who trust banks are more likely to use the regulated banking system rather than stashing their cash under their mattresses, relying on predatory lenders, or turning to alternatives like crypto,” he said. 

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