Kevin Spires, CFA, FRM
The Federal Reserve just released the results of its quarterly Senior Loan Office Survey(SLOS). The results show continued easing of credit conditions across the vast majority of Real Estate, Commercial and Industrial Loans (C&I), and Consumer Loans. Demand continues to be strong across most categories as well.
The Federal Reserve just released the results of its quarterly Senior Loan Office Survey(SLOS). The results show continued easing of credit conditions across the vast majority of Real Estate, Commercial and Industrial Loans (C&I), and Consumer Loans. Demand continues to be strong across most categories as well.
The SLOS is a great predictor of C&I loans. The SLOS conditions for medium and small business loans leads C&I loan growth by 4-6 quarters. Loan conditions have been easy enough to support 10-15% loan growth since the summer of 2010. Conditions will continue to support credit creation over the next 4-6 quarters.
There is no evidence of a credit crunch in the SLOS data. One interesting tid bit is that the FOMC had the SLOS data in hand for their last Open Market Committee meeting last week.
It is very difficult to argue for QE3 when credit conditions are this supportive of credit creation. The recent acceleration in Money Supply and Bank Credit should continue based on the Senior Loan Officer Survey. This data alone should have been enough to stop the Fed from embarking on further Quantitative Easing. It may be a bit premature to call Mission Accomplished, but the way I read the data, the Fed should be moving towards a normalized policy stance, not trying to ease further. Talk of a recession is fanciful and I think by year end, the chatter will move back towards the timing of the next Fed tightening and QE3 will have a stake put
There is no evidence of a credit crunch in the SLOS data. One interesting tid bit is that the FOMC had the SLOS data in hand for their last Open Market Committee meeting last week.
It is very difficult to argue for QE3 when credit conditions are this supportive of credit creation. The recent acceleration in Money Supply and Bank Credit should continue based on the Senior Loan Officer Survey. This data alone should have been enough to stop the Fed from embarking on further Quantitative Easing. It may be a bit premature to call Mission Accomplished, but the way I read the data, the Fed should be moving towards a normalized policy stance, not trying to ease further. Talk of a recession is fanciful and I think by year end, the chatter will move back towards the timing of the next Fed tightening and QE3 will have a stake put
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