Labor Day has come and gone. And our summer is nearly over. It is time for banks to begin developing their operating plans for 2019.

If you have followed our recommended approach over the past year, then you have reviewed your thoughts on M&A strategy. You have assessed your outlook for upgrades in technology (software, hardware, security, third-party vendors). You evaluated required capital expenditures over the next five years and set priorities. You determined your human resource requirements. And you have re-visited and either confirmed or modified your long term strategic plan.

Now is the time to leverage those longer term planning activities into an operating plan and budget for 2019. 

As you begin your 2019 operating plan, one of the key starting points is an interest rate scenario. For discussion purposes as you establish a viewpoint on the direction of interest rates, we offer up two scenarios. First scenario, the Federal Reserve implements three (3) hikes to the fed funds rate. And a second scenario, the Federal Reserve executes only two (2) hikes to the fed funds rate. Both scenarios are reasonable possibilities. These scenarios also assume that, as the economic growth slows slightly from the strong growth in 2018, the yield curve flattens further.

Here are the two scenarios (click on image for PDF):

Your 2019 Operating Plan should be the culmination of the various planning activities that you carried out throughout the past year. We hope that the above interest rate scenarios are helpful as you layout your own assumptions or incorporate from elsewhere.

Much continued success as your move into 2019! And visit our planning and banking data and information at BankingStrategist.com.