All the talk can be about what whether the Fed is lowering interest rates, but if credit conditions are getting tighter because banks are being more stringent on their approvals, then the intended effect will not occur. The price of credit is not the only mechanism for rationing the supply. The loan standards matter.
The Fed's senior loan officer survey shows that there is an overall neutral balance in standards, limited change in spread conditions, and weaker demand for loans. On balance, the survey suggests that there is limited change in credit availability conditions. If there was fear of an imminent recession, it is not showing up in these numbers.
ReplyDeleteThe issue has never been credit availability. The issue has always been credit demand.
The percentage of respondents reporting stronger demand for commercial and industrial loans is at its lowest level since the GFC, and it is trending down. No demand issue?
the Fed thinks it is about pricing. I agree there is a credit demand problem. The price does not matter if there is no cash flow.
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