Fed is done with hikes, but rates to stay high ‘for a long time’

“I think the Fed is close to having pulled this off. I think they’re done,” Demchak said. — Bloomberg

NEW YORK: The Federal Reserve (Fed) has finished raising interest rates, but they will remain high for a while amid “sticky” inflation, according to PNC Financial Services Group Inc’s top banker.

“I think the Fed is close to having pulled this off. I think they’re done,” chief executive officer (CEO) William Demchak said Tuesday during the Goldman Sachs Financial Services Conference in New York.

But he added: “I think they’re gonna stay there for a long period of time.”

PNC sees consumer data softening and the bank’s forecast assumes a slowdown, and even a mild recession, in the first half of 2024, Demchak said.

That was similar to the assessments of some other bankers at the conference, such as KeyCorp CEO Chris Gorman, who said rates will stay higher-for-longer and that the Fed’s attempt to engineer a soft-landing isn’t a “fait accompli”.

Asked if PNC would have any appetite for a whole-bank acquisition, Demchak said: “Scale matters today more than it ever has.”

Corporate treasurers have lost trust in regulators to keep all the nation’s lenders safe, so they’ve migrated along with their deposits to the mega banks, a trend that will never be reversed, Demchak said.

The Pittsburgh-based bank, the sixth-largest in the United States, wants to be “ubiquitous coast-to-coast” and has been adding people in the West Coast and southwest markets aggressively, Demchak said.

PNC has also started to “dip our toe” into share buybacks and will likely keep doing that, he said. — Bloomberg