The Rapid Rise in U.S. Interest Rates

The Rapid Rise in U.S. Interest Rates: A Discussion of the Risks and Opportunities for Financial Institutions and Consumers

Congress mandates the U.S. Federal Reserve to achieve conditions that satisfy their dual mandate of price (inflation) stability and maximum employment. The primary tool employed by the Fed to accomplish this challenging goal is adjustments to the Fed Funds Rate in response to what’s happening in the economy.

To combat the recently raging U.S. inflation rate, which is currently at a 40-year high, the Fed has been employing a very aggressive strategy of increasing the Fed Funds Rate to slow down economic activity and bring inflation back in line with historical averages. The magnitude and pace of these rate increases haven’t been seen since the 1990s and are having a significant effect on all aspects of the U.S. economy, both the private and public sectors. Banks must carefully manage the impact of rate hikes on the market, credit, and liquidity risks arising from assets and liabilities on their balance sheets. Meanwhile, consumers feel the effects of skyrocketing borrowing costs on their credit card and home mortgage payments. Mortgage rates recently hit a 20-year high, negatively impacting home affordability. On the other hand, higher interest rates also present unique opportunities for financial institutions and consumers who now earn very high yields on deposits and other assets after many years of meager rates.

Our panel of experts from a cross-section of U.S. banks and broker-dealers will discuss the positive and negative impacts of this unique and volatile interest rate environment on financial institutions and consumers and provide their outlook for 2023.

Moderator

Michael Leibrock, Managing Director - Chief Systemic Risk Officer and Head of Counterparty Credit Risk, Depository Trust & Clearing Corporation (DTCC)

Panelists

Anna Bertoni, Senior Director, Consumer Credit Review, Capital One

Evan Gerhard, President, ASL Capital Markets

Arthur Laichtman, M.D. Regional Head of Credit, Nomura Securities

Louis Latona, Senior Portfolio Manager, Treasury, Standard Chartered Bank

Questions

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