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Wall Street banks are already feeling huge pressure from a Fed rate cut that hasn't even happened yet (GS, BAC, MS, WFC, C, JPM)

Wall Street banks are already feeling huge pressure from a Fed rate cut that hasn't even happened yet (GS, BAC, MS, WFC, C, JPM)
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Several of Wall Street's biggest banks reported second-quarter results this week that rattled investors and got them worried about the impact of lower interest rates.




In the weeks leading up to bank earnings, investors and analysts were worried about net interest margins, one of the most important metrics for a banks profitability.




Both Wells Fargo and Citigroup reported declining net interest margins, and Goldman Sachs lowered its yearly outlook for net interest income.




The Fed is expected to adjust borrowing costs in July, and as rates move lower, banks earn less money on their overnight deposits to other institutions.




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The Federal Reserve's expected rate cut in July is already rippling through Wall Street.
All of the major US banks reported second quarter earnings this week, with several posting declines in net interest margins due to interest rates that have already fallen in anticipation for the Fed's action. Lower rates are bad for banks because they earn less interest income on overnight deposits to other lending institutions.
Investors are worried that net interest margins have already as the Fed prepares to start cutting rates in July. During a speech in late June, Fed chair Jerome Powell told the Council on Foreign Relations its better to adjust borrowing costs earlier rather later if there are signs of weakness in the economy.
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