November 4, 2023 / VOLUME NO. 286

A Heaping Scoop of Soft Landing 

In 1994, the Fed was worried about potential inflation and doubled the federal funds rate from 3% to 6%. Then, it reversed course the next year, cutting rates three times, worried about the potential economic consequences and feeling that inflation hadn’t materialized. 

“If the Federal Open Market Committee manages to take out just enough steam, but not too much, it might engineer a ‘soft landing,’ with inflation stabilized or reduced and either no recession or a negligible one,” wrote former Federal Reserve Vice Chair Alan Blinder in the Winter 2023 issue of the Journal of Economic Perspectives.  

The conventional wisdom is that soft landings are difficult to achieve. The reason is that it takes a long time for rising interest rates to ripple through an economy. Fed Chairman Jerome Powell said as much on Wednesday when announcing the FOMC voted to keep the fed funds rate stable at 5.25% to 5.5%. He said the current tightening hadn’t taken a big bite out of the economy because many borrowers continue to enjoy lower rates. Blinder wrote, “the overall process from altering the federal funds rate until its full effects on, say, [gross domestic product] can easily take a year or two.”  

That’s not preventing many from predicting a soft landing anyway. News stories declare: “The U.S. economy continues to defy gravity.” The head of the International Monetary Fund declared in October that remarkable global resilience cut the chances of a painful recession in the coming quarters. 

We’re at the tail end of the third quarter earnings season, and bank CEOs are regularly asked for their predictions. That’s understandable. Bank CEOs are knowledgeable about their geographies and their customers. Tom Broughton, the CEO of Birmingham, Alabama-based ServisFirst Bancshares, noted on a recent earnings call that we appear to be headed toward a soft landing, but added: “We don't run our bank based on any kind of economic forecast because they're all wrong.”

• Naomi Snyder, editor-in-chief for Bank Director

Curtailing the Shock of Costly Fraud Schemes

Check fraud is plaguing banks of all sizes, even as check volume declines. Here's what boards need to know to stay on top of this problem.

​“If a bank hasn't looked at their fraud losses, it is one of those things that can just slip up and shock you.”

— Rodney Rushing, ServisFirst Bancshares 

• Laura Alix, director of research for Bank Director

The Secret Weapon for Growth? Compliance

The best-performing banks use their compliance function to successfully execute their growth plans.

The Competitive Edge of Open API Platforms

Open API platforms enable banks to integrate third-party services, which can add more value for customers.

How Banks Can Effectively Embrace Digital-First Banking

Digital-first banks explore the entire customer journey for ways to incorporate digital elements into physical touchpoints.

How Boards Can Address Compensation Risk

Compensation committees should examine their existing processes for evaluating risk within incentive plans.