Ingram's Magazine July 2022

Uncharted Waters Economic conditions unlike any seen for decades weigh on the minds of business owners and the banks who lend to them.

by Dennis Boone

A neconomictea-leafreadinginmid- 2022 is starting to take on the precision of a late-night dart game at an Irish pub. On the one hand, you have experts predicting that the Fed will have to jack interest rates well above peak inflation— currently north of 8 percent—in order to tame that beast. On the other, some are

Somewhere between those two ex tremes lies an accurate depiction of where the economy is headed, carrying with it uncertainty for business own ers trying to measure the headwinds: Should I pull in the reins on spending and borrowing until there are clearer signals? Should I borrow now before rates go up? Will I be able to refinance

Fed countered with rates that pushed mortgages past 20 percent. Every day, though, there are fewer and fewer busi ness executives with living memory of navigating those waters. “We are in a unique position where the Fed is trying to get a grip on run away inflation, reverse quantitative easing and gradually pull excess li quidity out of the economy,” says Joe Close, president of Country Club Bank. “There is not a ‘normal’ to compare it to. We have never confronted this com bination of challenging variables.” Recent Fed moves, including last month’s interest-rate hike of 75 basis points, aren’t yet evoking post-traumat ic stress for those old enough to recall Paul Volcker’s Fed leadership. After all, says CrossFirst Bank’s president, Kris tin Tyson, “some borrowers may not remember that in 2019 the average in terest rate was 5 to 7 percent on loans, or back to early 1995, when the average 30-year mortgage rate was more than

“There is not a ‘normal’ to compare to. We have never confronted this combination of challenging variables.” — JOE CLOSE, PRESIDENT, COUNTRY CLUB BANK

suggesting that with inventories burst ing, the Fed will have to backtrack from recent hikes, and indications that more are coming, and will instead have to low er rates to stave off a deflationary period as retailers cut costs to move product.

if they go back down? Is my banker go ing to demand harsher terms of qualifi cation standards? From a historical perspective, we ar en’t incompletely unprecedented times: The last time inflation ran this high, the

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July 2022

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