A global pandemic, an ongoing supply chain crisis, high inflation, and the looming promise of more Fed interest rate hikes have put the economy on the crisis map. The current economy is on the fast track to being the first year, since at least World War II, that the winning streak of US Banks increasing deposits year over year may be broken. However, an automated treasury management solution can help you navigate the looming financial crisis.
Insights into the Current Situation
Some economists are predicting a recession. The possibility of such has the market on edge. In the hopes of avoiding a worst-case scenario outcome, the Fed is forecasting its intention to raise interest rates at a steep pace. This action has banks, and other financial institutions, scrambling to reallocate their stored deposits and assets. These efforts become necessary in anticipation of a significant reaction by bank customers to the Fed’s proposed interest rate hikes.
Bank stocks have begun to fall since the news of the Fed interest rate hike. The KBW Index fell nearly 20% as the year started and is now resting at just over 9% down, with the S&P reportedly logging in down 5.8% at the time of this posting.
The Standard Bank Model and Interest Rates
Previously, the standard bank model had relied on slow, predictable interest rate hikes, which could be easily planned for and managed by adjusting the bank’s internal interest rates on deposit accounts. When the Fed increased interest rates to deal with economic uncertainty in the past, the increases came at a gradual pace. Deposit growth slowed due to each rate hike, and banks adjusted accordingly and continued to profit.
The current economic situation and coming Fed interest rate hikes are unprecedented due to the many events affecting the global economy. Much of the vast amounts of stimulus funds sent out to support businesses and private citizens throughout the pandemic found their way into deposit accounts. FDIC data reported deposits rising $5 trillion, or 35%, during the past two years.
Taking Advantage of the Fed Interest Rate Hikes
In light of the Fed interest rate hikes, analysts and bankers expect those excess deposits to move out of deposit accounts and into money market funds. Short-term investments are the most likely options for consumers, while asset managers will be looking to move their funds to more lucrative and predictable locations.
Hoping to avoid a recession, the Fed is moving to hike interest rates and attempt to reverse the worst of the looming inflation crisis. To take advantage of the interest rate hikes, you will need to be able to pivot at a moment’s notice. As the incoming market volatility begins to rattle the financial world, an Automated Treasury Management Solution can help make sure you are in a position to take full advantage of the coming changes.
What Is An Automated Treasury Management Solution?
An Automated Treasury Management Solution is software that automates repetitive, manual tasks involved with managing treasury-related tasks and processes and helps you optimize your cash and investments.
Know When It’s Time to Pivot With Greater Visibility into Accounts
Staying in the know about your cash flow includes knowing the location, currency, type, and liquidity of your assets at any given time. This can be a daunting task, requiring time, skill, multiple employees, money management partners, asset management tools, and data reporting sources.
An automated treasury management solution can pull together all these disparate resources and tasks while making the data accessible in one system capable of delivering the crucial answers you need in a fraction of the time, and put them into action.
Treasury Curve enables you to efficiently see how much cash you have in the bank, at all times, that is currently deposited in non- or low interest bearing accounts. The platform efficiently allows you to manage and view how much of that cash is required for bills, and how much is excess. Treasury Curve can automatically help you allocate that excess cash toward investments that are managed to be safe, liquid, and have the potential to to earn more than if the cash stayed inactive in the bank.
Access to an Automated Treasury Management Solution empowers you to position yourself strategically and even take advantage of the Fed interest rate hikes. You can track and manage your treasury efficiently through access to new tools.
Contact Treasury Curve to optimize the management of your treasury. And help your team successfully navigate the unprecedented changes that are currently rocking the economy.