© Reuters.
Investing.com – The Federal Reserve released its weekly data on the banking sector, revealing a significant impact of the bankruptcy crisis on lending in a very short period.
The data revealed that the volume of lending from commercial banks decreased by 105 billion in two weeks (ending March 29). The drop of $45 billion in the last week was due to a sharp drop in lending from small banks after credit tightening after the Silicon Valley bankruptcy.
Jerome Powell, President of the US Federal Reserve, predicted that the bankruptcy crisis of Silicon Valley and Signature Bank would have strong results on the economy, playing a role similar to that of
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The credit crisis…a new threat to the growth of the US economy
The decline was not limited to lending, but US bank deposits decreased by $64.7 billion in the last week, marking the tenth consecutive decline in US bank deposits. US bank deposits fell by $290 billion in the last three weeks.
Economists are closely watching the Fed’s so-called H8 report, which provides an aggregate estimate of the weekly balance sheets of all US commercial banks for a gauge of credit conditions.
Recent bank failures have complicated the central bank’s efforts to bring down inflation without tipping the economy into recession.
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The Fed’s rate watch now indicates that expectations (two-thirds) are inclined to raise interest rates by 25 basis points at the next May meeting. As 65.5% believe that the Fed will raise interest rates by 25 basis points to the range of 5.00% – 5.25%, while 34.5% of investors and experts still believe that the Fed will accept interest rates for fear of the dangerous repercussions of the case of credit restriction and raising interest rates.
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Credit in America..is the crisis over?
The American Bankers Association index revealed that credit conditions fell to the lowest level since the beginning of the Corona pandemic, which indicates that experts believe that credit conditions will continue to weaken in the next 6 months, which makes banks cautious when granting loans for fear of a repeat of the Silicon Valley crisis.
“The banking crisis has magnified the prospect of a recession,” said Jamie Dimon, President of JPMorgan. “The recent collapse of a number of banks has created a lot of stress in the market and obviously will cause financial conditions to tighten somewhat as banks and other lenders become more aggressive. reservation”.
According to the Fed report, lending fell by $23.5 billion at the 25 largest US domestic banks in the last two weeks, and fell by $73.6 billion at smaller commercial banks over the same period. Lending by foreign institutions in the United States decreased by $7.5 billion.
