Higher interest rates putting banks in tough situations

OMAHA, N.E.(KELO)- The Federal Reserve’s effort to tame inflation by raising interest rates is putting local community banks in a tough spot.

Creighton University Economics professor Ernie Goss says banks need to raise rates on savings accounts in order to attract deposits.

The problem is, their profit opportunities on  loans aren’t covering the extra expenses.

He says that could lead to some local banks being swallowed up by regional banks.

Farm country lost over 40-percent of its community banks to mergers the last time this happened, in 2008.

Community banks are caught in a squeeze.

It’s being caused by the Federal Reserve’s campaign to tame inflation by raising interest rates.

Goss says that’s cutting in to bank profits.

Inflation has come down, but Goss says it’s still higher than the Fed’s goal of the two percent range.

Most of the bankers surveyed believe we’re headed for a recession.