Tuesday Topic: Inflation, Interest Rates and Loan Demand

One of the least effective things the Fed did in the Great Recession was to announce to the market that they would keep interest rates low as long as it took.  I believe the evidence is very clear that message actually elongated the recession environment.  The Fed wanted people to invest and purchase. However, it wasn't until people finally began to expect normalizing of interest rates that they began to execute more robust purchasing and investing activity.

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Neil Stanley
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Original Message:
Sent: 11-29-2021 11:39
From: Barb Rehm
Subject: Tuesday Topic: Inflation, Interest Rates and Loan Demand

The spike in inflation may lead to an increase in loan demand, as more borrowers anticipate a related rise in interest rates, American Banker reports. "Janney Montgomery Scott analysts studied the last six periods of notable inflation - spikes in 1974, 1980-81, 1984 and 1990-91, as well as smaller increases in 2001 and 2008 - and found correlating increases in loan growth. Anytime inflation surges, policymakers at the Federal Reserve begin discussing higher interest rates to slow spending and curtail price increases. When this happens, more consumers and businesses fast-track their borrowing plans to lock in loans before rates rise."

Are you seeing more interest in borrowing in your markets?

PS Since we took last week off for Thanksgiving, I want to share a few notable headlines:
"Centrist Dems Sink Biden's Nominee for Top Bank Regulator"

"Wall Street Grudgingly Allows Remote Work as Bankers Dig In"

"Biden Renominates Powell as Fed Chair, Cites 'Steady and Decisive Leadership'"

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Barb Rehm
Senior Managing Director
IntraFi Network
Arlington VA
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