Bank deposit balances shrink for first time since '92
For the first time since 1992, bank deposit balances fell in the first half of the year. Deposits decreased 0.4% for the six months between January and June to $7.69 trillion from nearly $7.7 trillion, and the yields on the deposits fell to less than 1%, according to analysis from Market Rates Insight. "Even inelasticity has its limits" said Dan Geller executive vice president at the California-based research firm. "For nearly two decades, deposit balances as a whole were very inelastic, and kept on growing despite substantial fluctuation in the average rate paid on deposits. It looks like in 2010 the inelasticity reached its limit." Market Rates Insight said deposit balances peaked in the fourth quarter of last year at nearly $7.7 trillion, which represented continual growth from about $3.27 trillion in the first quarter of 1992. Normally when the Federal Reserve lowers its fed funds rate -- although it currently can't go any lower -- it helps keep interest-rate yields stable. But that's not the case in the current recession, as the national average rate for deposits fell to 0.99% in July from 1.2% previously, according to MRI. Write to Jason Philyaw.
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