Financial conditions remain restrictive in mid-2024, according to the Federal Reserve’s semiannual Monetary Policy Report to Congress released on Friday. The report noted that credit remains “generally available” to households and businesses, albeit at elevated rates, which accounts for depressed financing activity. “The pace of bank lending to households and businesses increased in the first five months of the year but continues to be somewhat tepid,” the report added.
As for financial stability, the report indicated that “the financial system remains strong and resilient.” While the report noted some “signs of vulnerabilities building” — in the banking sector, namely fair value losses on fixed-rate assets and stress in parts of banks’ commercial real estate portfolios — the Fed noted that banks “continu[e] to report solid capital levels” and that “liquidity at most domestic banks remained ample, with limited reliance on short-term wholesale funding.”
