As interest rates remain historically high, Rajeev Aggarwal and Pierre Buhler share a cost-cutting playbook for banks in this ABFJournal article. Read a preview of the article below.
With interest rates showing no signs of decreasing, Pierre Buhler and Rajeev Aggarwal argue that bank executives must drastically reduce costs. To find a leaner way to operate, they suggest asking three key questions.
As the election nears, the debate over interest rates has become more about politics than policy. However, basic economics tells a simpler story: when inflation remains stubbornly high, interest rates need to be increased further.
In the U.S., as of mid-June, interest rates continue to be stuck at a 23-year high, as the Fed is hesitant to prematurely cut rates. Atlanta Federal Reserve president Rafael Bostic has said he only anticipates one cut this year. He has hinted that people are going to have to get used to a new normal, closer to where rates were in the 1990s and early 2000s than those of the last decade. While May inflation came in at 3.3%, a slight cooling versus April’s 3.4%, consumer prices remain on an upward inflation trend. U.S. debt also continues to mount at a staggering pace — currently at $34 trillion yet projected to grow by $1 trillion every 100 days.
In the UK interest rates continued to hover at 5.25% despite Bank of England governor Andrew Bailey predicting that they’ll soon be slashed. Is his projection overoptimistic? Inflation has dropped to 3.4%, the lowest in the past two years — yet this figure is still off from the BOE’s summer goal of 2%. The cost of living has also remained high, and gas prices have even slightly increased.
