Consumer loans and business loans… In the United States, consumer credit refers to unpaid flows of loans to individuals for household, family, and other personal expenses, excluding loans secured by real estate. In February, consumer loans increased by 11.3% year-on-year in seasonally adjusted terms. Revolving loans increased 20.7% year-on-year, while non-revolving loans increased 8.4% year-on-year. Credit growth for US banks accelerated in Q2, led by commercial loan growth. Fed data excludes mortgage loans, the largest category of household debt.

 

Development in US consumer loans… Source: Federal Reserve

 

Inflation and interest impact on expenditures… Consumer spending will be carefully monitored in the coming months to see how households are doing as the Fed raises interest rates and tries to move away from its loose monetary policy stance. As inflation and interest rates rise, the US consumer may cool down the demand a little in the future. As interest rates increase, private consumption and durable consumption tendencies decrease, so we will see a cooling effect in sectors such as housing, which this time also affects expenditures.

 

Conclusion? The Fed signaled rate hikes for the rest of the year to combat inflation, which was at a 40-year high, with the March consumer price index rising 8.5% in March. Policymakers had increased the benchmark rate by a quarter point in March after keeping it close to zero for the previous two years. Company performances may also be affected by the financing burdens of increasing loan rates. The Fed will start tightening with a 50 bps rate hike and if there is a signal about what to do in June or July, we will see a clear picture. If the Fed will continue as 25 - 25 after May, the market will react more calmly.

 

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