The Federal Reserve’s Senior Loan Officer Opinion Survey (SLOOS) shows that US banks have tightened credit standards and lowered loan demand in the second quarter, confirming the central bank’s interest-rate hike campaign is slowing the economy as expected.

The most cited reasons for tightening lending standards were a less favorable economic outlook, collateral values deterioration, and credit quality of commercial real estate and other loans.

Since March 2022, the Fed has hiked interest rates by 5.25 percentage points, and surveys and data show banks have slowed lending.

The SLOOS report justified an 11th interest-rate hike after skipping one in June, signaling credit tightening is continuing.

The data are not a guarantee of a recession, but the tightening evident as of late suggests that the economy should slow.

Consumer loan terms tightened and demand slowed, but certain categories increased from the first quarter.

The net proportion of banks reporting increasing willingness to issue consumer installment loans was -21.8%, the lowest outside of the pandemic since 2008.