Folks, in you haven't caught onto this already, this is a pay attention moment.
We've been banging the drum on this since SVB crumbled. The gist of it is, via Goldman Sachs:
What is this 'tightening'? More from that GS note I cited last week:
- "Small and medium-sized banks play an important role in the US economy,"
- "Any lending impact is likely to be concentrated in a subset of small and medium-sized banks."
- GS analysts assume that small banks with a low share of FDIC-covered deposits will reduce new lending by 40%
- other small banks will reduce new lending by 15% leading to a 2.5% drag on total bank lending
The Wall Street Journal's Nick Timiraos amplified Fed Chair Powell on just this:
Powell's remark was:
- "So, financial conditions seem to have tightened and probably by more than the traditional indexes say. Because the traditional indexes are focused a lot on rates and equities. And they don't necessarily capture lending conditions"
BoA cited this reasoning in their updated forecast: