Speak to the author: peter.serene@curinos.com
In a move that was widely expected, the FOMC cut the target range for the Federal Funds rate by 25 basis points to a range of 4.00% to 4.25%. The decision was nearly unanimous, with only one dissenting vote. (Newly confirmed Board member Stephen Miran would have preferred a 50-basis point reduction). The headline news from the Summary of Economic Projections (SEP) now suggest three 25-basis point cuts by the end of 2025, up from two 25-basis point cuts in the June SEP. The FOMC members’ outlook for real GDP improved modestly while the outlook for unemployment and inflation remain unchanged.
After months of attention-grabbing economic headlines, including large downward revisions to employment estimates for the first half of 2025 and volatile inflation readings, what’s most striking is how little projections in the SEP actually changed. That said, a deeper read into the statement, the press conference transcript and the individual responses to the SEP points to a high degree of uncertainty in the outlook for employment, inflation and monetary policy. As such, banks once again need to model a broad range of market scenarios as they enter their planning season.
The Impact on Deposits
In terms of the current market for bank deposits and implications for banks, the market remains challenging. Total system deposits are up by less than 2% YTD while the typical regional bank is experiencing deposit growth that’s flat to modestly negative (Figure 1). Yet pressures on net interest margin will motivate banks to try to bring down their deposit costs.
Figure 1: Average Deposit Growth YTD 2025
Source(s); Curinos Analyzer
Those effects will play out through the fourth quarter in consumer segments, where the maturity profile of CD books and a first-mover penalty on direct banks’ high-yield savings will delay the ability for banks to realize immediate funding cost reductions. In small business, overall cost savings will be limited because nearly 60% of balances are in non-interest-bearing accounts. In commercial and wealth, most of the action will take place behind the scenes through individually negotiated relationship rates (Figure 2).
Figure 2: Falling-Rate Deposit Beta | Aug ’24 - July ’25 Betas - Current Cycle¹
Source(s): Curinos Deposit Analyzer
Note(s): 1) Current cycle defined as Aug ‘24 – July ’25 (100-bp cut)
Navigating these headwinds will require banks to employ a range of techniques including segment-specific treatments that optimize both the magnitude and timing of down-pricing actions. And banks will need to be prepared with playbooks to respond to potential shifts in the market.
The Need for an Integrated Approach to Acquire, Grow and Retain Primary Relationships
In addition, banks will need to remain increasingly attuned to the implications of their rate-management strategies on acquisition, growth and retention of primary customer relationships across all segments. Today, banks can leverage the power of data and technology to serve their customers in deeper, more personalized ways than ever before. Yet, paradoxically, that same innovation is reducing friction for customers to manage their financial lives across a range of platforms and providers.
This is why pricing decisions can no longer be made in isolation. A deposit rate cut or incentive offer does more than affect the income statement this quarter. It shapes whether a customer consolidates balances, deepens with the bank or quietly migrates away. Conversely, banks cannot afford to offer favorable pricing indefinitely in cases where there isn’t a credible path to relationship profitability. The ability to see these tradeoffs clearly, across products and time horizons, is becoming essential.
Looking Ahead
The Fed is back in action, and we have a new base-case outlook. But as banks look to forecast the coming year, we recommend reading below the surface into the range of potential market trajectories indicated in the data and in the SEP projections. And in planning for how to respond to those scenarios, we expect that the pace of innovation in financial platforms and the evolution of customer behaviors will demand that banks view their pricing decisions through a lens that considers the overall customer relationship, even more so than a year ago.
