Tight Credit Conditions Add to Case for Fed Interest-Rate Cut

Fed Facing Pressure to Ease as Economy Slows

As the Federal Reserve wraps up its policy meeting Wednesday, the case for an interest-rate cut is growing. The central bank is widely expected to leave rates unchanged this week, but a growing number of economists and investors believe a cut is coming soon.

Tight Credit Conditions Add to Concerns

The latest data on credit conditions is adding to the case for a rate cut. The Federal Reserve's Senior Loan Officer Opinion Survey, released Monday, showed that banks are tightening lending standards for businesses and consumers.

The survey found that a net 22% of banks reported tightening lending standards for commercial and industrial loans in the third quarter, up from 19% in the second quarter.

Business Investment Slowing

The tightening credit conditions are starting to weigh on business investment. A separate report from the Commerce Department showed that business investment in equipment and software fell at a 0.6% annual rate in the third quarter, the first decline since the first quarter of 2016.

Fed to Cut Rates in December?

The weak data on credit conditions and business investment is adding to the pressure on the Fed to cut rates. A growing number of economists and investors believe the Fed will cut rates at its next meeting in December.