Bank Lending Standards Ease
February 15, 2024
Hard landing or soft landing? That has been the question since the Federal Reserve (the Fed) embarked on its most aggressive rate hiking cycle in more than four decades. Because bank lending is a key component of economic growth, the Fed’s Senior Loan Officer Opinion Survey has become a closely watched indicator of financial conditions.
Bank lending standards have tightened significantly since 2022, making credit more difficult to access. However, the latest survey suggests access to credit for businesses and consumers has improved. The number of banks that tightened their lending standards peaked in mid-2023, when the Fed delivered its last rate hike, and has now decreased to the lowest amount since 2022 across all loan categories. The survey also revealed that the proportion of banks that tightened their lending standards in the fourth quarter of 2023 was less than the prior quarter.
In recent weeks, we’ve seen evidence suggesting the U.S. economy is resilient enough to deliver a soft landing, which has been further reinforced by improving lending standards.
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