Interest rates on bank deposits trail Fed’s benchmark by most in recent history: N.Y. Fed paper

The interest rates banks pay on $18 trillion in deposits lags behind the fed-funds rate by the largest gap on record, according to a New York Fed paper, but that may be about to change.

Bank deposits are in focus for investors rattled by runs on institutions last month following the collapse of three regional lenders. But the paper, by economists Alena Kang-Landsberg, Stephan Luck and Matthew Plosser, highlighted the opportunity cost for depositors compared with other, higher-yielding investment vehicles, including money-market…