Deposit beta asymmetry is the measurable difference between how fast banks pass rate increases into savings and CD yields versus how slowly they pass rate cuts back down. It is the core transmission mechanism between Federal Reserve policy and the interest your household actually earns. When the Fed moved its target range down by 25 basis points in late 2024, the average high-yield savings account did not fully reflect that cut for roughly four months. Some accounts moved in six weeks. Others took 120 days. That gap is not random. It is a structural feature of how deposit pricing works, and it explains why your savings account lagged the last rate cut by four months while your credit card APR moved within one or two billing cycles.
This article maps the mechanics of that lag: the deposit beta formula, the asymmetry between upward and downward repricing, the role of funding desks and deposit franchises, and the specific time lags that show up in everyday accounts. It also connects the same mechanism to credit access and everyday prices, because deposit pricing is not a side issue. It is the funding side of every loan a bank makes.
What Deposit Beta Actually Measures
Deposit beta is the percentage of a change in a reference rate that a bank passes through to its deposit rates. If the Fed cuts the federal funds target by 25 basis points and a bank cuts its savings rate by 10 basis points, the deposit beta on that move is 0.40, or 40%. If the bank cuts by 20 basis points, the beta is 0.80. The formula is simple:
Deposit beta = change in deposit rate ÷ change in reference rate
But the behavior behind that formula is not simple. Banks do not apply one beta to all accounts. They apply different betas by product, by customer segment, by channel, and by time. A branch CD opened by a 72-year-old customer in Ohio has a different beta than a digital savings account opened by a 34-year-old in Texas. A money market account tied to a brokerage sweep has a different beta than a passbook savings account at a community bank.
The reference rate also matters. Most deposit pricing desks use the effective federal funds rate, the Secured Overnight Financing Rate, or a blend of Treasury yields and swap rates. When the Fed moves, those reference rates move first. Deposit rates move later. The size of that later move is the beta. The timing of that later move is the lag.
The Asymmetry: Up Fast, Down Slow
Deposit beta asymmetry is the pattern where banks raise deposit rates quickly when the Fed hikes but lower them slowly when the Fed cuts. The asymmetry is not a conspiracy. It is a rational response to deposit franchise value, funding needs, and competitive pressure.
During the 2022–2023 hiking cycle, the Fed raised the federal funds target from near zero to a range of 5.25%–5.50% in 16 months. High-yield savings accounts moved from roughly 0.50% to 4.50% or higher in that same window. The upward beta on digital savings accounts was often 0.80 to 0.90. Banks needed deposits to fund loan growth, and they competed hard for them. The upward pass-through was fast because deposit outflows were a real threat. Customers could move money to a competitor in three clicks.
When the Fed began cutting in late 2024, the same banks did not move at the same speed. The first 25-basis-point cut in September 2024 was followed by a second 25-basis-point cut in November 2024. By January 2025, the average high-yield savings account had fallen by only about 15 to 20 basis points total, not the full 50 basis points of Fed cuts. The downward beta was closer to 0.30 or 0.40 in the first 90 days. The full pass-through took four months or more for many accounts.
That is the asymmetry in one number: an upward beta of 0.85 during hikes versus a downward beta of 0.35 during the first 90 days of cuts. The gap is the bank’s margin. It is also the reason your savings account lagged the last rate cut by four months.
Why Banks Slow-Walk Rate Cuts
Banks slow-walk rate cuts for three concrete reasons: deposit stickiness, funding needs, and competitive signaling.
Deposit Stickiness
Deposit stickiness is the tendency of existing deposits to stay put even when rates fall. Most savers do not move their money the day a rate cut hits. They check their statement, notice the yield dropped, and decide whether to switch. That decision takes time. A 2023 survey by the Federal Reserve found that only 27% of households had compared deposit rates across banks in the previous year. The other 73% were not actively shopping. That stickiness gives banks room to cut slowly. They capture the spread between the lower reference rate and the still-higher deposit rate for as long as customers tolerate it.
Funding Needs
Banks still need deposits to fund loans, even when rates fall. If a bank cuts its savings rate too fast, it risks losing deposits to competitors that cut more slowly. The bank’s funding desk models the outflow risk at different beta levels. A 25-basis-point cut in the savings rate might cause a 2% outflow of balances. A 50-basis-point cut might cause a 7% outflow. The bank picks the beta that balances margin against outflow risk. That calculation is why the first cut is often smaller than the Fed’s move.
Competitive Signaling
Deposit pricing is also a signal. When a large bank cuts its savings rate by 10 basis points instead of 25, it is telling competitors that it will not start a race to the bottom. Other banks read that signal and follow with similar small cuts. The result is a slow, coordinated drift downward rather than a sharp repricing. That coordination is not illegal collusion. It is parallel pricing in a transparent market. Every bank can see every other bank’s posted rates on Bankrate and DepositAccounts.com within hours.
The Four-Month Lag in Practice
The four-month lag is not a single number for every account. It is a distribution. Some accounts repriced in six weeks. Others took 120 days. The average landed around four months. Here is how that distribution looked for a typical high-yield savings account after the September 2024 Fed cut:
- Week 1–2: No change. The bank’s pricing committee has not met. The reference rate has moved, but the deposit rate has not.
- Week 3–6: First cut of 5–10 basis points. The bank tests the market. Outflows are minimal.
- Month 2–3: Second cut of 10–15 basis points. The bank sees competitors moving. It follows with a larger cut.
- Month 4: Final cut of 5–10 basis points. The account reaches its new steady-state yield, roughly 20–25 basis points below its pre-cut level.
That sequence is the deposit beta asymmetry in action. The Fed’s 25-basis-point cut took four months to fully pass through. The bank captured the spread during those four months. The saver lost roughly $6.25 per $10,000 in annual interest for each month of delay, or about $25 total on a $10,000 balance over the four-month lag. That is a small number per household, but across millions of accounts, it is a meaningful transfer from savers to bank shareholders.
How Deposit Beta Asymmetry Connects to Credit Card APRs
The same asymmetry shows up on the borrowing side, but in reverse. Credit card APRs are tied to the prime rate, which moves in lockstep with the federal funds rate. When the Fed cuts by 25 basis points, the prime rate falls by 25 basis points the same day. Most variable-rate credit cards reprice within one or two billing cycles. The downward pass-through to borrowers is fast.
That creates a squeeze. Savers wait four months for a 25-basis-point cut. Borrowers get the same cut in 30 to 60 days. The bank’s net interest margin widens during the transition. That is why a rate hold can feel different depending on which side of the balance sheet you sit on. For more on how rate holds affect credit card borrowers specifically, see What a Rate Hold Actually Means for Credit Card Borrowers.
Deposit Beta by Product Type
Not all deposit products have the same beta or the same lag. The differences are large enough to matter for household cash management.
High-Yield Savings Accounts
High-yield savings accounts have the highest betas in both directions. They are digital, transparent, and competitive. Upward beta during hikes: 0.80–0.90. Downward beta during cuts: 0.30–0.40 in the first 90 days, rising to 0.70–0.80 by month four. The lag is real but shorter than for branch products.
Certificates of Deposit
CDs have a different mechanism. A CD’s rate is fixed at opening. The beta applies only to new CDs, not existing ones. When the Fed cuts, new CD rates fall quickly because banks do not want to lock in high funding costs. The downward beta on new CD rates is often 0.90 or higher within 30 days. Existing CD holders are unaffected until maturity. That creates a strange dynamic: your existing CD keeps paying 4.50% while new CDs pay 4.00%. The lag is zero for new CDs but infinite for existing ones.
Money Market Accounts
Money market accounts sit between savings and CDs. They have check-writing privileges, which makes them stickier than savings accounts. The downward beta is lower, often 0.20–0.30 in the first 90 days. The lag can stretch to five or six months. Banks know that customers who use money market accounts for bill pay are less likely to move their money for 25 basis points.
Branch Savings and Checking
Branch savings and checking accounts have the lowest betas. Many pay 0.01% regardless of the Fed’s moves. The beta is effectively zero. The lag is infinite. These accounts are pure funding for the bank at near-zero cost. The asymmetry is most extreme here: the bank never raised the rate during hikes and never cuts it during cuts. The rate is always 0.01%.
The Funding Desk’s Role
Behind every deposit rate is a funding desk making daily decisions about how much to pay for deposits. The funding desk is the bank’s internal market. It sets transfer prices for deposits and loans. When the Fed cuts, the funding desk lowers the transfer price it pays for deposits. The deposit pricing team then decides how much of that lower transfer price to pass through to customers. The gap between the transfer price and the customer rate is the deposit margin.
The funding desk uses a specific tool: the deposit duration model. Deposit duration measures how long a deposit is expected to stay at the bank. A checking account with direct deposit and bill pay has a duration of seven to ten years. A high-yield savings account with no other relationship has a duration of six to twelve months. The funding desk pays more for short-duration deposits because they are more likely to leave. It pays less for long-duration deposits because they are sticky. That duration difference is why your checking account pays 0.01% while your high-yield savings account pays 4.00%.
When the Fed cuts, the funding desk lowers transfer prices across the board. The deposit pricing team then applies different betas by duration. Short-duration deposits get cut faster because the bank is less worried about losing them. Long-duration deposits get cut slower because the bank wants to keep them. That is the mechanism behind the four-month lag.
What the Data Shows
The Federal Reserve’s H.8 data release tracks deposit rates at commercial banks. The data shows the asymmetry clearly. During the 2022–2023 hiking cycle, the average rate on interest-bearing deposits rose from 0.06% in March 2022 to 2.40% by December 2023. That is a 2.34 percentage point increase against a 5.25 percentage point increase in the federal funds target. The average upward beta was 0.45.
During the first four months of the 2024–2025 cutting cycle, the average rate on interest-bearing deposits fell from 2.40% to 2.15%. That is a 25-basis-point decline against a 50-basis-point decline in the federal funds target. The average downward beta was 0.50 over four months. But that average hides the product-level differences. High-yield savings accounts fell faster. Branch savings accounts barely moved. The aggregate beta is a blend of very different product betas.
The Federal Reserve Bank of New York publishes a monthly survey of deposit rates that breaks out the product-level data. The survey shows that online savings accounts had a downward beta of 0.65 by month four, while branch savings accounts had a downward beta of 0.10. The gap between those two betas is the deposit franchise in action.
Why This Matters for Household Cash Management
The four-month lag is not just an academic curiosity. It has practical implications for how households manage cash.
First, the lag means that moving money during the first month after a rate cut is often pointless. The bank has not yet cut its rate. You gain nothing by switching. The better time to switch is month three or four, when the full cut has passed through and you can see which banks cut the least.
Second, the lag means that locking a CD during the first month after a rate cut can be a mistake. New CD rates fall fast. If you wait 30 days, you might get a rate that is 15 basis points lower. If you lock immediately, you capture the pre-cut rate for the full term. That is a concrete, time-bound decision: lock within the first two weeks after a Fed cut, or wait and accept a lower rate.
Third, the lag means that money market accounts are often the worst place to hold cash during a cutting cycle. Their downward beta is low, but their starting rate is also lower than high-yield savings. The combination of a lower starting rate and a slow downward repricing means you earn less than you would in a high-yield savings account, even after the savings account reprices.
The Connection to Everyday Prices
Deposit beta asymmetry also shows up in everyday prices, though the channel is indirect. When banks capture a wider deposit margin during a cutting cycle, they have more room to lower loan rates without hurting profitability. That can accelerate the pass-through of rate cuts to mortgage rates, auto loans, and business credit. The deposit margin is a buffer that absorbs some of the Fed’s cut before it reaches borrowers.
That buffer is why mortgage rates do not fall one-for-one with the federal funds rate. The 30-year fixed mortgage rate is tied to the 10-year Treasury yield, not the federal funds rate. But the spread between the two is influenced by bank funding costs. When deposit betas are low, bank funding costs fall slowly. That keeps mortgage spreads wider for longer. The result is that a 25-basis-point Fed cut might translate into only a 10-basis-point decline in the 30-year mortgage rate over the first month. The rest of the pass-through takes time.
The same mechanism affects small business credit. Banks that fund small business loans with sticky deposits can afford to keep loan rates higher for longer. The deposit beta asymmetry is a hidden tax on borrowers and savers alike. It is the bank’s margin, and it is built into every rate you see.
What Is Already Priced Into Deposit Rates
Deposit rates do not wait for the Fed to act. They move on expectations. When the market expects a rate cut, banks begin lowering deposit rates before the Fed announces. That is the forward-looking component of deposit pricing. The September 2024 cut was widely expected. Some banks began trimming savings rates in August 2024, weeks before the Fed’s announcement. By the time the cut hit, the first 5 to 10 basis points of the decline had already happened.
That means the four-month lag is measured from the Fed’s announcement, not from the first market expectation. If you measure from the first market expectation, the lag is longer. The full pass-through from expectation to steady-state deposit rate can take five to six months. That is the time-bound reality of deposit pricing: the market moves first, the Fed follows, and the deposit rate trails both.
How to Read Your Own Account’s Beta
You can calculate your own account’s beta with three data points: the Fed’s cumulative rate change, your account’s rate before the change, and your account’s rate after the change. The formula is the same one banks use:
Your beta = (your new rate − your old rate) ÷ (new Fed target − old Fed target)
If the Fed cut by 50 basis points and your savings rate fell by 20 basis points, your beta is 0.40. If your rate fell by 40 basis points, your beta is 0.80. Tracking your beta over time tells you how your bank treats you. A bank with a low downward beta is protecting your yield. A bank with a high downward beta is passing the cut through quickly. Neither is good or bad in isolation. The question is whether the bank’s beta is consistent with its product type and competitive position.
For example, a high-yield savings account with a downward beta of 0.90 in the first month is unusual. Most high-yield accounts have a downward beta of 0.30 to 0.40 in the first month. If your account moved faster than that, your bank is either in a funding crunch or aggressively managing its margin. Either way, it is a signal worth watching.
FAQ: Deposit Beta Asymmetry and Your Savings Account
Why did my savings account rate not fall immediately after the Fed cut?
Banks apply deposit betas gradually. The first cut is usually small, often 5 to 10 basis points, because banks want to test outflow risk before making larger cuts. The full pass-through of a 25-basis-point Fed cut typically takes three to four months for high-yield savings accounts. Branch savings accounts may never fully reprice.
How much money did I lose during the four-month lag?
On a $10,000 balance, a 25-basis-point cut that is delayed by four months costs about $25 in foregone interest. The exact amount depends on your account’s starting rate and the size of the cuts your bank made. On a $50,000 balance, the cost is roughly $125 over the four-month lag.
Should I move my money to a different bank after a rate cut?
Not immediately. Most banks have not yet repriced in the first month after a cut. The better time to compare rates is month three or four, when the full pass-through has occurred. At that point, you can see which banks cut the least and move your money to the best remaining rate.
Do CDs have the same four-month lag?
No. New CD rates fall quickly after a Fed cut, often within 30 days. Existing CDs are unaffected until maturity. If you want to lock a rate, do it within the first two weeks after a Fed cut. If you wait, you will likely get a lower rate.
Is the four-month lag the same for every bank?
No. The lag varies by bank, product, and customer segment. Digital banks and fintechs tend to reprice faster than traditional banks. High-yield savings accounts reprice faster than branch savings accounts. The four-month figure is an average across high-yield savings accounts at large banks.
The Next Step for This Site
This article is part of a recurring column on the mechanics of consumer finance. The next piece in the series will map the deposit beta asymmetry to mortgage pricing, showing how the same four-month lag shows up in the spread between the 10-year Treasury yield and the 30-year fixed mortgage rate. If you have a specific account you want analyzed, send the rate history and the bank name. The column will track real-world betas from reader submissions and publish the results quarterly.
