Magazine article American Banker

Fed: Higher Rates Curbing Demand in Some Regions

Magazine article American Banker

Fed: Higher Rates Curbing Demand in Some Regions

Article excerpt

WASHINGTON -

Demand for credit was mixed in November, but higher rates turned off borrowers in some parts of the country, the Federal Reserve Board said Wednesday.

Demand for commercial and industrial loans was down or flat in St. Louis, Dallas, New York, Philadelphia, and Cleveland, according to the Beige Book, a periodic report on economic conditions compiled by the 12 Federal Reserve Banks.

Two Fed banks -- Boston and Minneapolis -- did not describe loan demand, while the Atlanta, Chicago, Kansas City, Mo., Richmond, Va., and San Francisco districts reported strong demand by businesses.

On consumer lending, most districts said demand continued "on an upward trend," but noted that some bankers are concerned higher rates may cause borrowers to pull back.

"Loan demand has softened in response to rate increases," according to the Federal Reserve Bank of Cleveland. "Competition for borrowers is stiff." The Cleveland, St. Louis, and San Francisco districts all said interest rate margins are narrowing.

The New York Fed said interest rates climbed on both deposits and loans while the Kansas City Fed said the cost of credit rose.

The Fed's monetary policymaking arm -- the Federal Open Market Committee -- considers the Beige Book when setting interest rates. The committee's next meeting is scheduled for Dec. 21.

At its most recent meeting on Nov. 16, the committee raised both the federal funds and the discount rate by 25 basis points, to 5. …

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