Magazine article American Banker

Fed Sees Rising Rates Fueling Uncertainties of Consumers, Firms

Magazine article American Banker

Fed Sees Rising Rates Fueling Uncertainties of Consumers, Firms

Article excerpt

WASHINGTON -- While the economy continues to grow at a steady pace, rising interest rates have engendered new uncertainties among consumers and businesses, the Federal Reserve reported Wednesday.

In its periodic look at regional economic activity, the central bank reported "solid economic growth" in most of the country. Lending continues to pick up, with consumer demand far outpacing that by companies.

But some surveyed by the Fed said rate changes have made them more cautious about the future. A few suggested this caution was leading some businesses to hold off on new projects.

Fear Begets Caution

And while rate increases have led some "fence-sitters" to enter the home-buying market, lenders in some areas say they are "cautious about future loan demand because of their fears of further rate increases."

The Fed's report, called the Beige Book, is prepared every six weeks by the Fed's district banks.

The Federal Open Market Committee, which next meets on May 17, uses the report to help guide monetary policy.

A closer look at regional economic conditions follows:

Boston: A "moderate recovery" continues, with increasing activity in retail, manufacturing, and residential real-estate sectors. Housing sales throughout much of the area are stronger than they have been in a decade.

New York: Economic activity is "by-and-large more favorable," although loan demand remains mixed. A third of those surveyed have raised rates on deposits, and most others say they are likely to soon.

Philadelphia: Bankers say consumer confidence is improving and they expect personal lending to stay strong. Much of the rising loan volume has come from consumer installment lending.

Cleveland: Bankers report mixed loan demand, although consumer lending outpaces that by businesses. All bankers contacted expect further increases in rates this year. …

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