Hard data on bank lending and credit will come into play, augmenting top-line statistics like unemployment and inflation that the US Federal Reserve is focused on.
that the Fed is focused on. As Fed policymakers gauge whether tougher bank lending may let the central bank forego future rate hikes, bank officer surveys will also be mined for clues about sentiment among those driving credit decisions.
“Survey data is going to be very important because it’s going to give us a sense of whether financial institutions are pulling back even more on their credit standards,” Cleveland Fed President Loretta Mester said last week. “We already saw it happening, which you’d expect to see as interest rates moved up…. That was kind of a normal thing.”
A Conference of State Bank Supervisors survey found the lowest sentiment among community bankers since the poll began in 2019. Nearly all of the 330 respondents, some 94%, said a recession had already begun. What this means for consumption, business investment, and inflation “remains difficult to gauge,” wrote Peter Williams, director of global policy strategy at ISI Evercore. “This latest shock will add another, challenging-to-model, layer to the outlook.”Small businesses are already reporting tightened profit margins, a recent Bank of America study found.
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