Rates Are Falling, And CDs Are Already Leading The Way

Now that the Fed has weighed in with a half-point rate cut, many financial institutions are under even greater pressure to drop rates to boost sagging profit margins, and so far rates on CDs have led the charge. Curinos data show that as of July 2024, 56% of traditional banking institutions had already reduced their CD portfolio rates ahead of any move by the Fed, and a third of them had reduced their portfolio rates on savings. Of those who had moved lower on CDs, 17% cut their rates by 5 bp, 17% by 10 bp and fully 23% by more than 10 bp, bringing the weighted portfolio rate of this last group down to 4.00% (see charts).

The down-pricing trend is a harbinger of more aggressive rate cuts to come, and many FIs are poised to pass any further Fed rate decreases on to consumers. Doing so will likely create downward pressure on CD retention and acquisition volumes, particularly for providers that have decreased CD rates ahead of their peers. It could also mean that CD volumes in the latter half of 2024 won’t continue to grow at the same rapid pace of the past 12 months.

With profitability at stake, many FIs will have no choice but to down-price, but they need guidance. Data-driven analytics supported by Curinos’ industry benchmarks such as Retail Deposit Analyzer can help them target with precision where attrition can be minimized.