By Chris Cox
Published Sept. 17, 2015
For months now, economists have taken their turns debating over whether the Federal Reserve will raise interest rates for the first time in seven years.
As deliberation rages on, one thing is certain: the banking industry is sure to benefit should the central bank issue a rate hike, local industry leaders said Thursday during the Columbia Regional Business Report’s quarterly “Power Breakfast” networking event.
“We’d like to see a little bit of an increase in interest rates,” said Mike Brenan, BB&T’s South Carolina Regional President. “Our margins have been as ugly as I’ve ever seen them in my entire career in the banking industry.”
Such a move would signal positive growth for the country’s current economic standing, he said. Should the Fed opt to raise rates, it would do so to return borrowing costs to normal levels now that the economy is healthy enough.
“From a more traditional perspective, if the Fed does increase interest rates that is typically a good sign that we’ve got a robust, thriving economy that’s growing at a fairly rapid pace,” Brenan noted. “I don’t believe that’s necessarily the case today, but generally rising interest rates are a good thing for business, industry, economic development and economic prosperity.”
Holt Chetwood, the Wells Fargo Midlands Market President, agreed a hike would be good for the banking industry from a margins standpoint. The bigger concern is when, or if, it will actually happen.
The Federal Reserve likely missed the most opportune window to do so, he said, which would have been last summer. A decision may not come until possibly later this year. This afternoon the Fed voted 9-1 to leave the rate unchanged.
“The question is, ‘If not now, then when?’” Chetwood said. “Just from my perspective, the Fed has been forecasting a rate increase now for years. At some point you just say, ‘Here we go.’”
The Fed has had a target rate of 0.0 to 0.25% for the last seven years in order to boost the economy, and expectations are that if it does decide to raise rates it would do so by one-quarter of 1%. That should not impact the small businesses Columbia bankers work with, according to First Community Bank President and CEO Mike Crapps.
“We don’t believe in listening to our clients that that kind of movement is going to change the fundamental basic investment decisions that our clients make,” he said.
Chris Stormer, a founding partner at CPA firm Bauknight, Peitras and Stormer, echoed those sentiments.
“Interest rates are low right now. So if they pop up by a quarter I don’t see it impacting anybody’s decisions,” he said. “If you start jumping them up more and throwing in a tax increase or something along those lines, then you’ll start to see some decisions being impacted.”
Reach Chris Cox at 803-726-7545 or on Twitter @chrisbcox.