FDIC compares bank impact of different inflationary periods

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.