American banks now offer customers a better deal

When the Federal Reserve began to raise interest rates more than a year ago, American banks enjoyed a nice little boost. They increased the interest they charged on loans, while keeping the rates they offered on deposits steady. In other countries this move attracted public opprobrium and politicians floated measures to ensure that customers were not swindled. Americans were happy to rely on a more American solution: competition.It has done its job. Average yields on interest-bearing bank deposits have soared to more than 2.9%, up from 0.1% when the Fed began to raise interest rates. The extent to which higher rates have been passed on to customers—known as the “deposit beta”—has been a popular subject on recent quarterly earnings calls. Despite assurances by bank bosses that they have peaked, betas are likely to keep rising in the coming months, pinching profits.