Page 8 - October 24, 2024 Bulletin

aRTiCLeS

HSA Assets Grew to $137B In 2024 Yellen also urged support for “regulators’ efforts to strengthen long-
term debt requirements for regional banks so that they can be more
Approximately $137 billion was saved in almost 38 million health effectively resolved if they do fail.”
savings accounts by the end of June 2024, representing a year-over-
year increase of 18% in assets and 5% in accounts, according to a Read more: https://home.treasury.gov/news/press-releases/jy2618
new report by HSA investment solution provider Devenir. The firm
projects that total HSA assets will reach more than $142 billion by Bank Economists: Soft Landing
the end of the year Remains Likely, But Risks Remain

About 9% of HSA holders had invested at least a portion of their The American Bankers Association’s Economic Advisory Committee
account savings, according to Devenir. Account holders contributed expects moderating inflation to enable the Federal Reserve to reduce
$31 billion to their accounts in the first half of 2024, an increase of the federal funds rate and support an ongoing economic expansion,
6% from the previous year. They withdrew $20 billion from their according to the latest forecast released by the group.
accounts during the same period, down 2% from the year prior.
The committee, composed of 15 chief economists from some of
“There continues to be some seasonality in the percentage of North America’s largest banks, expects solid real economic growth at
accounts that are unfunded,” Devenir said. “Accounts are often around 2% for both the second half of 2024 and for 2025. The bank
opened during the fall open enrollment season, but remain economists’ current consensus is that near-term recession risk stands
unfunded until early the following year. Halfway through 2024, at 30% in 2025, unchanged from the group’s last forecast in March.
about 19% of all accounts were unfunded, up from 18% from a year
ago.” “When it comes to hitting its dual mandate targets on employment
and inflation, the Fed is close to ‘mission accomplished,’” said
Read more: https://www.devenir.com/wp-content/uploads/2024- Luke Tilley, committee chair and chief economist at M&T Bank/
Midyear-Devenir-HSA-Research-Report-Executive-Summary.pdf Wilmington Trust. “At the same time, despite expectations for

Yellen: Banks With ‘Less continued growth, the labor market has softened from historically
tight levels. That is something that will need to be monitored going
Stable Deposits’ Need Greater forward.”
Supervisory Attention The unemployment rate has risen from 3.4% at the beginning of
2023 to 4.2% in August of this year. Going forward, the committee
There is a need to address “weaknesses” in the banking system that expects the unemployment rate to peak at 4.4% in the first half of
last year’s failures of Silicon Valley Bank and Signature Bank exposed, 2025, a bit higher than the previous forecast.
Treasury Secretary Janet Yellen said.
The group expects inflation to continue to glide down to the Federal
During a speech at the U.S. Treasury Market Conference in New Reserve’s long-run goal of 2%. The committee’s forecast is that
York City, Yellen said the strong financial system in the U.S. was personal consumption expenditures, the Fed’s preferred inflation
crucial to the nation’s historic economic recovery, “with banks indicator, will meet the Fed’s long-term goal of 2% by the second
continuing to lend and provide other critical services throughout quarter of 2025.
the COVID-19 pandemic.” However, the SVB and Signature Bank
failures demonstrated the need for greater supervisory attention on Following the 50 basis point cut in September, the consensus view
banks “with less stable deposits,” she said. Yellen also said the U.S. of the committee is that the Federal Reserve will continue to reduce
needs regulations that account for unrealized losses on securities. interest rates, cutting the target federal funds rate range by an
additional 150 basis points between now and the end of 2025.
“We also need changes so that banks are better prepared for
liquidity stress, such as making sure that they have diverse sources “It’s the longer-term path that matters more, and our expectation is
of contingency funding and especially that they have the capacity to for the Fed’s policy rate – which is still restrictive – to reach a more
borrow at the discount window and periodically test this capacity,” neutral level by the end of next year,” said Tilley.
Yellen said. “This includes considering establishing collateral pre- With lower rates, the committee members expect credit availability
positioning requirements to facilitate borrowing from the [Federal to expand and credit quality to remain stable over the next six
Reserve’s] discount window, improving the discount window’s months. The forecast anticipates bank consumer delinquency rates to
operational capacity, and enhancing coordination between the remain relatively stable, at 2.7% in 2025.
discount window and the Federal Home Loan Banks.” [Federal
Reserve Vice Chairman for Supervision Michael Barr also expressed Read more: https://www.aba.com/news-research/analysis-guides/
support for the proposals during a separate speech the same day.] economic-advisory-committee-forecast

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