The Fed and the Consumer

Apollo Chief Economist

Since the Fed started hiking in March 2022, interest rates on auto loans have increased from 4.5% to 7.5%, interest rates on credit cards have risen from 16% to 22%, and loan growth has been slowing for both small and large banks, see the first three charts below. 

With the Fed still hiking and saying they will keep interest rates at current levels “for a couple of years,” the ongoing slowdown in consumer spending will continue, see the fourth chart.

The bottom line is that monetary policy is working exactly as it is supposed to: Higher rates are leading to slower growth.

Interest rate on auto loans
Source: FRB, Bloomberg, Apollo Chief Economist
Interest rate on credit cards
Source: FRB, Haver Analytics, Apollo Chief Economist
Small bank and large bank lending growth slowing
Source: Federal Reserve Board, Haver Analytics, Apollo Chief Economist
Weekly data for same-store retail sales slowing down
Source: Redbook, Haver Analytics, Apollo Chief Economist

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