<story><title>Banks are slow to increase rates on savings accounts, but quick to reduce them</title><url>http://jpkoning.blogspot.com/2020/06/banks-are-slow-to-increase-rates-on.html</url></story><parent_chain><item><author>leetrout</author><text>I heard this story &amp;#x2F; explanation before:&lt;p&gt;You own a gas station and you want to fill up your tanks so you call the distributor and pay $1 &amp;#x2F; gallon. You then sell that for $1.10 &amp;#x2F; gallon making a 10% profit.&lt;p&gt;Now prices of crude doubles and you have 1000 gallons left to sell. It’s going to cost you $2 &amp;#x2F; gal to refill so you immediately raise your price to prevent a loss and cover the next fill.&lt;p&gt;I don’t know how accurate that is to the real situation gas stations face but I’d never thought of it in terms of selling higher to afford the next bulk delivery.</text></item><item><author>save_ferris</author><text>This seems like pretty typical market behavior to me. Are we really surprised that banks are taking the opportunity to increase their profits by choosing not to pass down all savings to customers?&lt;p&gt;The same exact thing happens with gas stations. The price of gas never falls quite as fast or far for the consumer as it does for the retailer, but gas stations will instantly respond to price increases. I’m sure there are dozens of other examples of this.</text></item></parent_chain><comment><author>bryanlarsen</author><text>But when the price drops back down you don&amp;#x27;t immediately drop your price because why would you charge $1.10 for something you paid $2 for?&lt;p&gt;But your competitor will lower their prices when they get a refill, so you may end up having to lower your prices before you get your own refill.</text></comment>
<story><title>Banks are slow to increase rates on savings accounts, but quick to reduce them</title><url>http://jpkoning.blogspot.com/2020/06/banks-are-slow-to-increase-rates-on.html</url></story><parent_chain><item><author>leetrout</author><text>I heard this story &amp;#x2F; explanation before:&lt;p&gt;You own a gas station and you want to fill up your tanks so you call the distributor and pay $1 &amp;#x2F; gallon. You then sell that for $1.10 &amp;#x2F; gallon making a 10% profit.&lt;p&gt;Now prices of crude doubles and you have 1000 gallons left to sell. It’s going to cost you $2 &amp;#x2F; gal to refill so you immediately raise your price to prevent a loss and cover the next fill.&lt;p&gt;I don’t know how accurate that is to the real situation gas stations face but I’d never thought of it in terms of selling higher to afford the next bulk delivery.</text></item><item><author>save_ferris</author><text>This seems like pretty typical market behavior to me. Are we really surprised that banks are taking the opportunity to increase their profits by choosing not to pass down all savings to customers?&lt;p&gt;The same exact thing happens with gas stations. The price of gas never falls quite as fast or far for the consumer as it does for the retailer, but gas stations will instantly respond to price increases. I’m sure there are dozens of other examples of this.</text></item></parent_chain><comment><author>Threeve303</author><text>This is what happened during Katrina and some of the hurricanes of the past decade or two.&lt;p&gt;The situation with the banks is slightly different.&lt;p&gt;The odds that the product, money, will cost more for them in the future does not line up with the recent history of bailouts, regulation changes, etc.&lt;p&gt;During Katrina, for example, it was a safe bet for the gas station owners that the next batch of gasoline could cost significantly more. 
A reasonable assumption due to the multiple wars in the middle east combined with a bad hurricane season shutting down gulf coast refineries.&lt;p&gt;In other words, the Federal Reserve did not run a discount window to provide cheap oil to gas stations. Even the strategic petroleum reserve, if tapped, would only benefit the refineries.&lt;p&gt;At any rate, one could argue that in both situations the entities involved made the safest and most profitable decision available to them.</text></comment>