Lending Slowdown Suggests Rate Hike Pause

Posted May 26, 2023

Fed Chairman Powell has said that the recent turmoil in the banking sector is likely to cause bank lending to slow; and that slower bank lending, should it occur, would weigh on economic growth, hiring, and inflation, thereby reducing the need for the Fed to increase the Federal Funds Rate as much as it may have had to do otherwise.

Of course, what the Fed does with interest rates will have a major impact on the stock market and other asset prices.

Therefore, the latest Macro Watch video looks at recent trends in bank lending to see if there is evidence that lending has indeed begun to slow.

It also provides a quick tutorial on how to access and use the Fed’s H.8 Release, where the latest data on bank lending can be found.

The video shows that we have transitioned from a period when expanding bank credit was underpinning economic growth to a period of flat bank lending which will do nothing to support economic growth.

It also points out that evidence of tighter lending conditions is likely to persuade the Fed to leave the Federal Funds Rate unchanged at its next FOMC meeting on June 13^th – 14^th.  

For all the details, Macro Watch subscribers can log in and watch this video now. It is 15 minutes long and contains 37 slides that can be downloaded.

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