REUTERS: Banks raise prime lending rate
July 27, 2022 —
Why is the prime lending rate moving up?
Running Point and I were quoted by Reuters in an article — by Mehnaz Yasmin, “Wall Street banks raise prime lending rate after Fed’s sharp hike” — regarding Wall Street banks JPMorgan Chase, Citigroup, and Wells Fargo raising their prime lending rates by 3/4% to 5.5%.
How the prime rate is set:
Since 1955, the U.S. prime rate has never been lower than 3.25%. It is usually set 3% above the federal funds rate established by the Federal Reserve Bank. So far this year, the prime rate has followed the federal funds rate higher step-by-step. Today was a “prime” example with the Fed increasing its federal funds rate by 0.75% and large banks following suit, raising their prime lending rate by the same amount.
Quoted article excerpts are below:
“Today’s move is further admission from the Federal Reserve that it was too generous with its monetary policy in 2021 and that it is trying to reverse things quickly,” said Michael Ashley Schulman, chief investment officer at multi-family office Running Point Capital Advisors.
“If the U.S. enters a recession now, it would be a most unusual one with plentiful credit, low unemployment and high inflation — remarkable dynamics not normally associated with an economic slowdown,” Schulman added.
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Originally published at https://runningpointcapital.com on July 27, 2022.