A Federal Reserve survey showed that US banks tightened credit standards during the first months of the year and noticed weak demand for loans from businesses and consumers, the latest sign that the US central bank’s interest rate hike is starting to affect the financial sector.
The Federal Reserve’s quarterly survey of senior loan officers, the first since a series of recent bank failures, found that 46% of banks have tightened lending conditions for a key category of loans to medium-sized and large companies, compared with 44.8%. % in the previous survey, which took place in January.
For small companies, the conditions are somewhat stricter.
And 46.7% of banks said lending conditions have become tighter, compared with 43.8% in the latest survey.
Banks reported that firms of all sizes were less in need of credit than they were three months ago.
On the consumer side, banks said weak demand for credit cards, auto loans and other forms of consumer loans has returned, though not to the same extent as at the end of last year. Banks are less willing to provide loans to consumers that can be repaid in installments.
Economists studying the response to the survey say the rise in bank stocks, which are tightening credit standards, is gradually slowing economic activity and could be a harbinger of a downturn.
