The decision of the Federal Open Market Committee to eliminate two cuts in the third quarter of the federal funds rate was intended to help minimize the US economy's risk that it would slip to a recession. This means that a reduction in the number of short-term loans indexed to short-term rates would reduce the net interest income of the borrowers.
Most banks can not compensate with lower financing costs for lost revenue. In the meantime, bond markets have projected additional stimulus to the central bank by significantly lowering the banks ' long-term interest rates.
The US is facing a competitive disadvantage for other developed economies, President Trump continues to seek significantly reduced interest rates. The banks he predicted to suffer the highest declines in profits if the current Fed strategy were taken theoretically at an extreme level of negative interest rates, were Keefe, Bruyette and Woods analyst Federich Cannon.
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