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Stagflation Stress Tests Treasury as Rates Bite and Liquidity Tightens
Stagflation risks put bank Treasury and ALM teams in a squeeze: funding costs stay high while growth weakens and credit strains build. That combination can magnify IRRBB through deposit betas, optionality, and valuation shocks, while also raising liquidity risk as customers seek yield and alternatives. Preparing now means tighter scenario design, stronger hedging discipline, and sharper contingency funding plans.
Feb 02, 2026
Mark Norman, Head of Content, Center for Financial Professionals
Tags:
ALM, Treasury and Liquidity Risk
The views and opinions expressed in this content are those of the thought leader as an individual and are not attributed to CeFPro or any other organization
- Stagflation squeezes
profitability as funding costs stay high while growth weakens
- IRRBB can spike
through higher deposit betas and shifting customer optionality
- Economic value
sensitivity rises in volatile curves and widening spreads
- Liquidity risk
increases as deposits become more mobile and wholesale funding tightens
- Stablecoins and
digital assets can accelerate deposit competition and outflow speed
- Stronger scenario
design hedging discipline and contingency funding plans improve resilience
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