Credit Tightening Hits Small Businesses Amidst Stagnant Inflation
St. Louis Federal Reserve President Alberto Musalem is sounding an alarm about uneven credit tightening across different segments of the US economy.
The divergence in credit markets means large corporations with access to capital markets and strong balance sheets are navigating current conditions just fine, while small firms that rely on bank lending are facing difficulties.
This two-speed credit market is a concern because small businesses account for a disproportionate share of US employment and local economic activity. Musalem has stated the overall credit picture is 'not worrisome,' but the divergence matters.
Musalem's hawkish stance on monetary policy is driven by his view that inflation hasn't come down fast enough, and he believes substantive policy action is needed to rein in price pressures.