The Federal Reserve's latest Senior Loan Officer Survey, published for July, shows that banks did not tighten or loosen lending standards for commercial and industrial (C&I) loans during the second quarter.
Within the corporate sector, banks reported a rise in demand for C&I credit originating from large firms and from middle market companies over the period covered by the survey. At the same time, banks indicated no net change to the terms and conditions they apply to those loans.
On the household side, responses were more heterogeneous. Lenders noted mixed shifts in lending standards across different types of consumer credit. The survey also recorded a decline in demand for residential real estate loans during the second quarter.
Those lending dynamics are reported against a backdrop of ongoing elevated inflation, continued solid output growth in the economy, and a labor market that remains broadly stable. The report makes clear these conditions persisted through the period captured by the survey responses.
The Fed continues to weigh monetary policy choices aimed at returning inflation to its 2% objective. In the week prior to the survey release, the central bank kept its target federal funds rate range unchanged at 3.5% to 3.75%. Chairman Kevin Warsh did not offer guidance on the Committee's next moves when the rate decision was announced.
In sum, the Q2 survey presents a picture of steady bank lending standards for business borrowers, rising demand among larger corporate clients, and more variable conditions for household lending, including softer demand for mortgages. These findings arrive while policymakers monitor inflation and economic indicators in deciding future policy direction.
Summary
Banks reported unchanged lending standards for commercial and industrial loans in Q2, higher demand from large and middle market firms, mixed household lending conditions and weaker demand for residential real estate loans. The results coincide with persistent inflation, solid economic growth and a stable job market. The Fed left its policy rate range at 3.5%-3.75% and provided no forward guidance.