Credit rates are still extremely volatile at this point, but have seemed to relax enough to help give a clearer forecast for the coming months. Because of the current situation credit rates are low and still dropping. Inflation is the past months has dropped from 5% to 2% and still real credit rates are increasing. In the construction industry and increased number of borrowers are being asked to pay rates higher than the premiums for prime borrowers.
Credit rates have put a huge constraint on construction since they demand a large amount of credit to finance projects. Although credit rates will eventually decrease, it is going to be a long time before this happens. Credit restraints will most likely continue to stay high throughout the recession and cause the recovery to slow down.
I found it very interesting that this article talked about how the Treasury recently borrowed at a rate of 0.0% interest. They took this money to pour into the financial systems and get them infused with fresh capital. The problem is that now banks have the money but need to rebuild their capital assets and decrease their lending. So basically banks have money, but are unwilling to lend any of it. How is this going to help the economy recover?
1 comment:
It is interesting that the Treasury borrowed money at a rate of 0.0% interest. This says that consumers feel that the only safe place for their money is with the Government and that there is a lack of confidence in banks as well as the market.
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