Investors seeking a relatively safe place to store cash could see rates on bank certificates of deposit top 5%, the firm found.
Banks have been pumping up the rates they pay on certificates of deposit , or CDs, in recent weeks as they compete to gather customers' cash. That dynamic has accelerated along with market expectations that the Federal Reserve will have to raise its benchmark interest rate higher to subdue inflation, Morgan Stanley analysts led by Betsy Graseck said Tuesday in a research note.
" Higher rates have made holding cash a possible alternative to bonds and stocks for the first time in more than a decade. While better payouts reward savers, they also increase pressure on the industry's profits because they squeeze the interest income that banks generate. The industry's top average CD rate has already climbed by about 3.5% since the Fed started raising rates last year and currently sits below 4%, Graseck wrote.
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