Reasoning
The Federal Reserve's decision to hold rates at 3.50 to 3.75 percent, coupled with the June 2026 SEP median projection of 3.8 percent for the year end 2026 funds rate, indicates a persistent hawkish stance. This higher interest rate environment, a shift from prior cutting bias, typically leads to slower bank credit growth as borrowing becomes more expensive for consumers and businesses. Historical precedents show that prolonged periods of elevated interest rates correlate with subdued credit expansion.Key uncertainty
The actual pace of inflation and its impact on the Federal Reserve's future policy decisions, which could lead to a reversal of the hawkish stance and potentially stimulate credit growth.