Why Banks May Be Flush With Deposits for Some Time
Deposits in the U.S. banking system climbed steadily through much of 2019, but once the pandemic hit, they flooded the system to never-before-seen levels. Much of that can be attributed to investors rotating into cash in order to escape riskier assets during the pandemic, as well as Americans saving more when there wasn't as much to do. Trillions of dollars in stimulus from the federal government only drove up deposits more.
With the effects of the pandemic lessening around the U.S. and gross domestic product expected to grow 7% this year, many analysts and investors are trying to gauge how sticky the huge influx of deposits will be once spending picks up, and if the money will be removed as quickly as it came in. But there's good reason to believe that the excess liquidity could be here to stay for some time. Here's why.
Banks have seen an extraordinary amount of deposits come into the banking system -- there was roughly $17.09 trillion of deposits sitting in U.S. commercial banks as of May 26.
Source Fool.com
