A staggering 96% of community bank leaders expect a recession to hit within the next 18 months, according to a new survey by IntraFi, a leading fintech that runs the largest bank deposit network.
Bank CEO’s, Presidents, COO’s, and CFO’s from 388 unique institutions nationwide were evenly split between those who saw a recession by the end of this year and those who said it would begin sometime in 2023. Roughly half said that if a recession occurs, the primary fault will lie with the Federal Reserve for raising rates too high and too quickly since the beginning of this year.
"Bankers have become less confident in the Fed's ability to curb inflation while guiding the economy to a soft landing," said Mark Jacobsen, CEO and Cofounder of IntraFi. "To a degree greater than reflected in the equity markets today, most banks do not believe the Fed can constrain inflation without triggering a recession."
The Fed has raised interest rates four times so far this year, including a 75-basis-point hike in July, the largest since 1994.
In all, 62% of bank leaders surveyed at the end of the second quarter said the Fed is overcorrecting for inflation, 10 percentage points higher than those who said the same in IntraFi's first quarter survey. Another 18% believe the Fed is not raising rates fast and high enough, while 21% said the Fed is on the right track.
While 51% said the primary reason for a recession would be the Fed's overcorrection, another 25% said it would happen due to ongoing supply chain problems. Sixteen percent cited other issues, including a combination of factors.
Editor’s Take:
One can argue whether we are currently in a “technically” defined recession, but it is difficult to argue with so many bankers who see one coming soon. Thank goodness agriculture tends to run countercyclical and is experiencing relatively strong financial results. Agriculture is impacted most this year by weather, access to markets, input costs and product availability. Although they are experiencing some issues with these factors, overall, they have very strong balance sheets and excellent net income prospects. That is precisely why we continue to encourage all CAD members to put farmers and ranchers very high on their prospective customer list. Always remember that AgPack is truly an ace in the hole when it comes to obtaining business from farmers/ranchers. They use the products - it saves them additional money - AND it is no cost to you!
