The Economy

Aging populace informs monetary policy

Demographic trends are reshaping the U.S. labor force, leading economists and policymakers to rethink the key macroeconomic parameters that drive decision making, and reassess their views about the economy’s longer-run growth potential. Like melting glaciers, changes in global demographics are difficult to see in the near term, but over time they will reshape the landscape. [Continue]

Chicken Little and the economy

closeup of an acorn

Just like Chicken Little, the bond market was recently hit on the head with an acorn, and the yield curve screamed “recession.” The yield curve temporarily inverted, and the three-month Treasury yield was higher than the 10-year yield. This created a bit of hysteria, because an inverted yield curve has predicted the last seven recessions since 1970 with only one head fake. [Continue]

Behavioral economics allows insight into customer decision-making

Patterns of behavior, including how a customer feels — their emotional state when they are interacting with banking professionals — is valuable information in creating successful transactions and relationships. If bankers know the behavior of a group inside of its customer base in data-analytical terms, and know how their customers feel when they are interacting with their financial selves, it makes it easier to offer products and services that the customer may not know exist. [Continue]

Will next generation move banks beyond challenges?

The focus in the banking industry during 2017 continued to be on performance. The Fed began raising the fed funds rate in late 2015 and again in late 2016. All expectations were for rate increases to resume in 2017, which they did in January, March and July up to a range of 1.00 to 1.25 percent, where it has remained. Even with these increases, margins remain compressed and borrowers are challenged by persistent concerns, particularly in the agricultural economy. Ag output pricing remains low and current supplies high. Therefore, as producers try to wait for price increases to sell, returns to producers resulting from improved yields on new production are not expected to materially increase overall returns and may have the effect of increasing downward pressure on prices, thus reducing returns. To increase prices more, avenues for sales need to open up. Trade restrictions can be counterproductive to development of market expansion, keeping domestic supplies to low valuations. This is putting pressure on land valuations adding further complications for banks operating in the agricultural communities. [Continue]

Pondering the intricacies of monetary policy

Wow! What a year 2017 has been. Manic hardly describes the antics in Washington after the election of Donald Trump. Those of you who know me are keenly aware that to me, “poly” means many, and “tics” are blood-sucking insects. … I digress, my apologies. This article is not about the swamp; it is about the community-banking environment heading into 2018, so let’s stay focused. [Continue]