Local bankers: Fed will need to increase rates soon

The Federal Reserve's decision to leave rates unchanged is good news for Western banks, but the board will need to raise rates soon, local banking officials said Wednesday.

Banks in the region benefit from flat rates or declining rates, said Timothy Coffey, vice president of research for securities firm FIG Partners because many of their loans have variable rates that change faster than rates on deposits. In addition, flat or declining rates help because many Western banks have substantial sums in noninterest bearing checking accounts for individuals and businesses.

"Given the state of the economy ... it would have been a very negative thing for Las Vegas had they raised rates," said Paramount Bank CEO Paul Kadavy. "I'm sure depositors are a bit disappointed."

Dale Gibbons, chief financial officer of Western Alliance Bancorporation, said fed funds rates are expected to go up soon, but delaying that rate increase is going to help.

At the Federal Reserve Board, "they are dancing on the head of a pin," Gibbons said.

The Fed must balance its desire to help "clean up from the train wreck" caused by the home mortgage crisis and the impact of rising commodity and food prices because of inflation.

The Fed typically raises rates to reduce inflationary pressures.

Gibbons said 57 percent of Wall Street's money in the options and futures markets is betting that the Federal Reserve Board will make no change in rates at its Aug. 5 meeting.

But two-thirds of the money says the fed will bump up rates by one-quarter of a percent or more on Sept. 16.

The decision to keep rates unchanged Wednesday was "widely anticipated," said Mike Threet, chief operating officer and chief financial officer at Silver State Bancorp in Henderson. "It will have no impact on Silver State Bancorp," he said.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.