Inflation and banking

This weekend in Bank Vault, we're looking at inflation and how banks and regulators are dealing with it.

The ABCs of how inflation hurts bank profits: When the prices of U.S. goods and services soar, the Federal Reserve tends to raise its benchmark interest rate, and commercial banks are pinched in several fundamental parts of their business.

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The glory days of consumer lending are fading: Consumer loan balances fell in July for the first time since 2020 as banks have tightened lending standards in response to rising rates and jettisoned assets to bolster liquidity and capital levels.

Powell says Fed has "long way to go" in reaching inflation goal: In his highly anticipated speech in Jackson Hole, the Federal Reserve chair acknowledged the progress made in cooling down inflation, but said the central bank would not hesitate to raise rates further if needed.

Consumers favor spending rewards as credit card debt climbs: Consumers prefer credit cards that offer better spending rewards and that card issuers should consider providing services to help their customers manage growing account balances, J.D. Power's annual survey found.

High credit costs prompt businesses to seek BNPL loans: The product, which is both popular and controversial in consumer financial services, is attracting interest from merchants that don't want to pay high interest for a traditional loan.

FHFA stress tests reveal new vulnerabilities in U.S. housing market: Fannie Mae and Freddie Mac can likely withstand potential credit losses twice as high as last year's in the latest scenario, but they are at more risk of slipping into the red.

Bankers: tell us how your bank is working with small businesses. American Banker is conducting a survey right now and we’d love your insights.?You can contribute to the survey here .?