Banks rein in supply of credit, weaker demand will be next

Rising interest rates have led lenders to rein in the supply of credit to households in Q2, but they haven’t yet curtailed demand. That said, the latest credit conditions survey doesn’t capture the full extent of the recent rise in borrowing costs since mid-June. That suggests the resilience in demand is unlikely to be sustained and a further deterioration in bank lending will weigh on real activity in the coming months.

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