Excerpt: “A January 2022 analysis, ‘On Point: Deposit Growth Likely Slowing but Abundance of Low-Cost Funding Could Endure Through 2022,’ noted that after surging in 2020-2021, bank deposit growth would slow sharply. And in fact, after peaking at a 21 percent year-to-year pace in the fourth quarter of 2020, deposit growth decelerated, falling to just a 1 percent rate by the second quarter of 2024. This projection assumed that the personal saving rate would come down substantially from its elevated level of 10 percent at that time. Deposits surged in 2020-2021 in part because households received large government transfers and saved a substantial portion of them. Households then spent that excess savings, placing downward pressure on deposits. This On Point article updates our outlook for bank deposits, given the consensus view through 2025 of declining interest rates accompanied by modest growth in nominal and real GDP and a relatively stable saving rate.” (footnotes omitted)
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