Inflation and Rates and US Banks, Oh My!

The Federal Reserve is expected to proceed with additional rate hikes and begin winding down its $9 trillion balance sheet during the remainder of 2022. How quickly the Fed will tighten monetary policy remains in question though as the central bank balances elevated inflation against slowing economic growth and potential fallout from unprecedented sanctions levied against Russia over its invasion into Ukraine.

Unlike in the past rate hike cycles, U.S. banks stand awash in excess liquidity, which will allow institutions' earning-assets to reprice much more quickly than deposit costs and lead to notable net interest margin expansion. However, if Fed actions hurt the economy too much and the central bank has to slow or cease rate hikes due to concerns over weaker economic growth, margin expansion could prove fleeting and credit issues might become a concern.

Tune in for a discussion on the outlook for the U.S. economy in 2022 and 2023, including inflation expectations, recession risk and the implications for U.S. Commercial Banks with S&P Global Ratings Chief Economist Beth Ann Bovino and Principal Research Analyst for U.S. Commercial Banks, Nathan Stovall.