Highlight of the Week
U.S. Banks Lost a Record $370 Billion in Deposits Last Quarter
- Banks saw a significant decrease in deposits in the second quarter. The loss is not concerning for most banks that had more deposits than they wanted due to pandemic stimulus.
- During the pandemic, the NY Fed program grew substantially. Experts were expecting money to flow out of the reverse-repo facility first before deposits were impacted. This has not been the case so far.
- Now, it appears that deposits will continue to flow out and reduce the Fed’s reserves faster than expected.
Rate Curves
Rapid Report:
U.S. Bid to Revive Chip Manufacturing Collides With Wall Street’s Demands
- The Chips and Science act passed by President Biden in July will subsidize chip manufacturing from companies like Intel.
- Intel is one of the few chip manufacturers committed to the domestic production of microchips.
- Despite Intel’s commitment and support from the US government, investors still seem to favor asset-light companies, such as AMD, who design the chips and then outsource production to countries like China or Taiwan.
U.S. Inflation Remained High in August
- The CPI rose 8.3% in August which is down slightly from 9.3% in July. The core CPI saw an increase in the growth rate compared to months prior which indicates that price pressure remained strong in August.
- These inflation results strongly suggest that the Fed will have to raise rates by a least .75 basis point.
- Jerome Powell stated that rate increases would bring down inflation. “they will also bring some pain to households and businesses.”
