Will banks in the US continue to offer CDs? Earlier this year, the Fed abolished the reserve requirement. My understanding was that the motivation for banks offering CDs was because the Fed didn't impose reserve requirements on CDs, so banks could lend out more of deposits held as CDs than deposits held in other, lower interest forms. Given that CDs no longer provide an advantage to banks over normal accounts in this respect any longer, why do banks have any incentive to keep offering CDs? Is there another reason banks offer CDs?
Demand deposits might be cheaper, but they can disappear due to withdrawals. Banks also need stable sources of longer-term funding to match against their illiquid assets. Holding reserves is only of limited economic importance relative to the need to widen funding sources.
CD’s are cheap relative to other sources of term funding. It would be very hard to imagine that they will be phased out.