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Central Markets by Robert Lloyd, CFA

The information contained herein has been obtained from sources believed to be reliable, but the accuracy of the  information cannot be guaranteed. All opinions and outlooks are subject to change.

  • Writer's pictureRobert Lloyd, CFA

Inflation Series: Part 5 Lending is INCREASING as rates rise

If the Fed was hoping higher interest rates would slow lending and economic growth, they are sadly mistaken. As we saw in the lead up to 2008, as rates increase, the incentive to lend increases because higher yields mean higher interest income.

This implies that the money supply affected by credit expansion is increasing rapidly at the same time the Fed is trying to slow things down. In our view, credit market expansions are an important part of money supply and associated inflation/deflation.

Here is the key question: with long-term yields now falling, will the credit expansion slow thus starving the real economy of cash to keep expanding? This is highly likely and very much in line with our 2023 cyclical views on inflation and interest rates: lower next year.

If you'd like to discuss how to manage through this environment, please reach out to us

Chief Investment Officer

Lloyds Intrepid Wealth Management

Lloyds Intrepid LLC is doing business as Lloyds Intrepid Wealth Management. Lloyds Intrepid LLC offers investment advisory services in the State of Texas where registered and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. Lloyds Intrepid LLC and its advisers do not provide legal, tax or accounting advice. Lloyds Intrepid LLC formulates retirement plans, investment strategies, portfolio construction and investment due diligence for clients with signed investment advisory agreements with us. The information contained herein has been obtained from sources believed to be reliable, but the accuracy of the information cannot be guaranteed. All opinions and outlooks are subject to change.

© 2022 Lloyds Intrepid LLC

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