Company: FITBI
Filing Date: 2025-08-05
Form Type: 10-Q
Source: 0000035527-25-000171
Chunk: 219

Company: FIFTH THIRD BANCORP
Filing Date: 2025-08-05
Form: 10-Q
Item: Item 1
Chunk 219
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 the Baseline scenario and 10% to each of the Upside and Downside scenarios. The Baseline scenario used in the June 30, 2025 ACL assumed that inflation rates peaked at around the same level, but at a later date when compared to the scenario used for the March 31, 2025 estimate. These changes reflect recent data and increased uncertainty that has arisen from changes in U.S. fiscal, tariff and immigration policies. This scenario assumed a peak rate of inflation of 3.7% in the second quarter of 2026, gradually returning to target in early 2027 and averaging 3.2% and 2.1% in 2026 and 2027, respectively. In response to fiscal tightening and high interest rates, this scenario also assumed that real GDP growth would be below trend in the near term but that the unemployment rate will remain steady. The Baseline scenario assumed an average annual real GDP growth rate of 1.5% for 2025, followed by 1.4% in 2026 and 1.8% in 2027. The Baseline scenario also assumed an average unemployment rate of 4.2% for 2025, followed by 4.7% for both 2026 and 2027. The Treasury rate environment is expected to be relatively stable with the 10-year yield remaining within a narrow projected range of 4.2% to 4.3% through 2027. Credit spreads are projected to expand from an average of 2.0% in 2025 and reach their peak level of 2.6% in late 2026. Lastly, the Baseline scenario assumed additional cuts to the target federal funds rate, with an average federal funds rate of 4.2% in 2025 that decreases to an average of 3.4% and 3.0% in 2026 and 2027, respectively.

The Upside scenario assumed that, on an average annual basis, the change in real GDP is 2.0% in 2025, 2.8% in 2026 and 2.2% in 2027. The Upside scenario also assumed an average unemployment rate of 3.9% in 2025, 3.7% in 2026 and 4.0% in 2027. In this scenario, 10-year Treasury yields are fairly stable, reaching a peak of 4.4%