2. But there will be lasting effects from recent events
US banks with under $250bn in assets are big drivers of loan growth in the US, supplying about $550bn of loans last year, or a little over 2% of US GDP. Such banks are likely to curtail lending as they worry about the stability of their deposit bases. That contraction in credit should hit small and medium-sized businesses in particular.
Banks everywhere will likely have to raise deposit rates, pushing up their cost of funding. That should show up in higher rates for lending. Bigger banks will surely note the swift demise of Credit Suisse, a systemically important bank that was over-capitalised, according to its own regulator. They are likely to turn more conservative on loan growth too. Finally, there are the lagged effects of past interest-rate hikes that should continue to ripple through economies.