- The cone of possible economic outcomes and their impact on deposits in the forseeable future is unusually wide—from stagflation with higher rates to moderate growth with a few rate cuts.
- That’s going to require thoughtful scenario-based planning strategies that are grounded in deep data-fueled analysis.
- Not engaging in such planning may result in costly adjustments, such as repricing down without considering the cost of reacquisition or pricing up without understanding the impact of cannibalization.
Following a decade of slow predictable growth at unattractive rates, retail deposit growth since 2020 has been extremely volatile and hypercompetitive. This year started with an expectation of steady rate cuts and a return to normal growth, but the new administration’s policy agenda and an increasingly challenging fiscal deficit are creating unprecedented uncertainty for deposit growth and rates in both 2025 and 2026.
That’s made the cone of possible outcomes for financial institutions much wider than usual—from stagflation with shrinking deposits and higher rates to moderate growth with a few rate cuts. Because neither path is a straight predictable line, FIs will need to prepare for either outcome or be ready to shift strategies as data emerge. Without readiness, pivoting can be expensive and chaotic, and lacking it can mean the difference between a highly valued FI and an also-ran. There’s no out-of-the-box playbook for this, so each institution will need to build their own. What’s yours?
How We Got Here
We ended 2024 with 3.8% deposit growth nationally and started 2025 expecting a glide path to a normal growing economy with low inflation along with multiple rate cuts in 2025 and 2026 and a terminal rate of 2.6%. But in early 2025, inflation persisted, economic growth remained solid, and rate-cut expectations faded as higher-for-longer terminal rates stayed higher than the last peak in rates. At the time, Curinos forecasted traditional bank deposit growth in 2025 at 2.8%, with two rate cuts in May and December. (Nationals and direct banks had a stronger Q1 than in 2024, while the growth at traditional banks was just below their performance Q1 2024.) But then the policy environment changed and now, all bets are off.
As the economy reacted to government austerity actions and “Liberation Day” tariffs that went from a flat 10% increase, to reciprocal at 10-50%, to 145% on China and then back down, Q1 GDP was -0.8%. Weakness in government spending was offset by business investment in inventory buildup, pull-forward in consumer purchases of cars and other durable goods and a steep increase in net imports. The Fed and economic forecasters updated their models frequently, and the outlook is still anybody’s guess.
We haven’t been through a situation like this, and I think we have to be humble about our ability to forecast it”…“There are many parties in that chain…the manufacturer, the exporter, the importer, the retailer and the consumer, and each one of those is going to be trying not to be the one to pay for the tariff,…but someone will have to pay, whether it’s just one party or all of them.
Possible Scenarios
If tariffs stay where they are, they could lead to materially higher inflation and a stagnating economy, which could force the Fed to raise rates by 75 bp and could shrink deposits. If, on the other hand, tariff increases are reduced with some certainty, and macro effects of uncertainty and the remaining tariffs are subdued, we could still come out with slow growth, rate cuts of 50 bp and growth in deposits (Figure 1). The 2025 outlook for traditional bank deposits ranges from -2% to +5%, and it’s negative compared with our Q1 forecast. Growth for traditional banks will be lower than this range, and growth for direct banks will be higher.
Figure 1: Economic Outlook Scenarios
Source: Curinos Analysis, WSJ April 2025 Economic Survey, Federal Reserve SEP, Survey of Professional Forecasters, Congressional Budget Office Economic Data
For the massive pool of U.S. deposits, the difference between stagflation and moderate growth is a wide range, and the impact on individual banks could be even greater depending on their growth imperatives, segment focus and pricing strategies (Figure 2). A smaller $20 billion growth-focused traditional bank with a higher beta could see growth slow to 1% vs. 5% with a 50 bp or $90 million increase in portfolio cost. A larger, cost-focused, lower-beta FI could see deposits fall to -6% vs. -2%, with an increase of 25 bp or $165 million in portfolio cost.
Figure 2: P&L Impact of Differing Institutional Strategies
Source(s): Curinos Analysis, Curinos Deposit Analyzer
A specific institution’s outcome could be further affected by the segment mix of its portfolio, as well as its asset mix and growth prospects. In a stagflation scenario, an FI focused on the mass market would see declining checking balances because their customers have a higher concentration of “today” money, which would be under pressure from inflation and unemployment. A mass affluent-focused FI would find retaining its more rate-sensitive balances to be more expensive because its customers have more “tomorrow” and “someday” money that seeks better returns and is more likely to be in motion.
The critical question becomes, which one of these profiles does your FI resemble, and do you know how your book will perform in these scenarios? And what might you need to do to meet the growth and expense expectations of your CEO, CFO and the Street?
The Need for Scenario-Based Planning
One thing is clear: For this range of uncertainty, there’s no one-size-fits-all and no off-the-shelf user manual. Rather, today’s environment requires thoughtful scenario-based planning for your book, your strategies and your trajectory that is grounded in deep analysis of your FI performance data versus the competition (Figure 3). Your stakeholders will need to be aligned around a clear-eyed set of expectations, actions and outcomes. And you’ll need a clear slate of strategies that include impact measurement and operational readiness to successfully shift strategies, as needed, on short notice.
Figure 3: Bespoke Scenario-Based Planning
Not having a plan can result in the need for unexpected and costly adjustments, such as repricing down without considering the cost of reacquisition, which includes marketing, or pricing up without fully understanding the impact of cannibalization. And because shifts in pricing strategies require lead time to implement, outcomes from a pricing tactic can vary as the environment changes. They need to be tested for different scenarios, including short- and long-term impacts.
The top-performing banks use multiple deposit strategies and can pivot based on bank objectives and market conditions. The advantage from forward planning comes in part from avoiding changes in direction. Banks with smoother growth curves and consistent pricing strategies have outperformed.
Another important consideration is operational requirements that include systemic implementation, preparing the field and engaging and deploying marketing, all of which require lead time. Finally, having the right stakeholders and partners on board within the FI is key to a harmonious execution of the plan.
Are you prepared? The takeaway is that FIs need to build plans for multiple possible outcomes, ensure near-term tactics don’t have medium-term downside risks and have a broad set of tactics ready to go quickly. Committing time, resources and lining up help where needed is the first step they need to take asap. There could be no more pressing imperative for FIs today.
