Lending data highlights the significant impact of the Fed's tightening

Historically a lagging indicator, aggressive Fed tightening has already resulted in a major decline in bank lending growth, indicating that the Fed does not need to hike rates further.

Executive summary

Lending data shows that the Fed’s tightening has had a major impact

While debate continues as to whether the Fed will, or should, deliver any further interest rate hikes, commercial bank lending data shows that the Fed’s tightening has already had a major impact.

The overall level of commercial bank loans & leases have been largely stagnant since February, marking a major shift from the significant growth seen in 2H21 and 2022. As a result, YoY growth has fallen from a peak of 12.4% in December 2022, to 4.4% as of 13 September, while 6-month annualised growth is just 0.6%.

Commercial & industrial and consumer automobile loans see a particularly significant hit, but commercial real estate loans continue to grow

Breaking down commercial bank loan & lease data into its key segments, shows that the outstanding amount of commercial & industrial loans has fallen by $70bn since pe…