The numbers: Commercial and industrial loans — a key economic driver — fell slightly in the week ending Aug. 2, the Federal Reserve said Friday. Lending dipped by $500 million to $2.75 trillion in the week.
C&I loans hit a peak of $2.82 trillion in mid-March, right before the collapse of Silicon Valley Bank.
Key details: Lending by large banks rose $1.8 billion to $1.55 trillion in the latest week. That is the third straight weekly gain.
Lending by small banks fell $1.3 billion to $716.1 billion. That is the fourth straight weekly decline.
Total bank deposits rose by $32.4 billion to $17.6 trillion in the same week. That is the fourth straight weekly gain. Deposits peaked at $18.2 billion in mid-April 2022 as the Fed began to raise interest rates.
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Big picture: Commercial and industrial loans have fallen for four straight months. That’s a worry for policymakers.
The Fed’s latest survey of bank lending officers suggests that credit conditions remain very tight. This could cause a credit crunch and slow the economy.
Demand for loans also seems unusually low. And the tightening of bank lending standards “is much larger that what was observed during past monetary tightening,” said Marco Casiraghi, economist at Evercore ISI.
Market reaction: The Dow Jones Industrial Average
DJIA
finished with a modest gain for the week. The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
was up 8.5 basis points to 4.17% on Friday.
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