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Fed to keep rates steady due to decreasing banking loans

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May 7, 2024

U.S. banks saw a decrease in demand for industrial loans and household credit in the first quarter of 2024, according to data from a Federal Reserve survey. The Fed also made the decision to keep rates in the 5.25% to 5.5% range to combat inflation, according to a report by Reuters.

This was in part driven by large and medium-sized banks tightening standards for commercial and industrial loans, with 15.6% saying they had done so compared to 14.5% the previous quarter. Banks also reported tightening standards for auto loans, even as demand for those loans hit their lowest in a year.

"Many consumers and businesses are feeling the pinch from reduced credit availability even as the Fed looks set to keep interest rates higher into 2025," Ben Ayers, economist at Nationwide, said in the report. "This could set the stage for weaker activity ahead and makes the economy more susceptible to an unexpected shock."

Despite this news, the survey found that commercial real estate lending is seeing some increase in supply and demand.