Reasoning
The Federal Reserve's current policy stance, with the federal funds target range at 3.50 to 3.75 percent and a hawkish shift indicated by the elimination of a cutting bias, suggests a prolonged period of restrictive monetary policy. This, combined with the median year end 2026 funds rate projection of 3.8 percent, significantly higher than previous forecasts, will likely dampen credit demand and availability, pushing bank credit growth below 2.0% year over year in the second half of 2026.Key uncertainty
The pace and extent of potential future rate cuts by the Federal Reserve beyond the current expectations, particularly if inflation proves more stubborn than anticipated.