The recent inflationary period has had a different impact on banks than did the periods of stagflation during the 1970s, the FDIC said in a new report.
Details: In “Implications of High Inflation for Banking Outcomes and Deposit Flows: Observations From 2021 to 2022 and the 1970s,” the agency said:
Loan growth and loan performance differed between the two periods and depended more on broader economic conditions than on inflation.
Robust deposit growth in the 1970s suggests that banks were actively seeking deposits, while banks generally were flush with deposits in 2021-2022 due to pandemic support programs.
The differences between the two periods illustrate the importance of considering broader macroeconomic conditions when analyzing the effects of inflation on banks.
