The Fed has been increasing the Fed funds rate, but banks have not increased interest rates on checking accounts and savings accounts, see chart below.
Households that want to benefit from rising short rates need to actively take money out of their bank accounts and into CDs, money market funds, or floating rate credit funds.
The implication for markets is that the transmission mechanism for monetary policy is weaker because the idea with a higher Fed funds rate is to attract money into savings and away from consumer spending.
With very high household savings and very high levels of deposits in banks, this lack of an increase in interest rates on checking accounts and savings accounts is likely a contributing reason why consumer spending is still so strong.
Source: FRB, RateWatch, Haver Analytics, Apollo Chief Economist. Note: Savings and Checking accounts minimum threshold balance $2,500.
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