Since the Federal Reserve decided to pause interest rates earlier today, regulators have seemingly left the door open for potential rate cuts in 2024.
Citizens Vice Chair and Head of Commercial Banking Don McCree joins Yahoo Finance Live to discuss what this means for the bank and credit lending conditions.
"There's not been a large demand out of our client base or Corporate America in general, they have been worried about the economy and worried about the level of rates," McCree says. "So they've toned down their investment and their businesses."
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Video Transcript
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JOSH LIPTON: The Fed putting rate cuts on the table for next year. The dot plot suggesting three cuts coming in 2024. News sending markets higher. The Dow closing at a record high. We also saw bond yields slide.
And our next guest has key insights into the fallout of Fed policy on business. Joining us now is Don McCree, Citizens vice chair and head of commercial banking. Citizens has $225 billion total assets.
Don, it is good to see you. You're the perfect guy to talk to, Don. I want to get your reaction to the Fed news today. Obviously, investors like what they heard, but I want to get your response, Don. Also, just walk us through what it could mean for your business.
DON MCCREE: Yeah, it's obviously a big day for the markets and for the Fed. And they clearly have made the decision that we're at the end of this interest rate cycle. I don't know if the rate cuts next year will be 75 basis points, or 100 basis points, or 125. It's really going to be based on the trajectory of the economy.
But I think this is nothing but good for our business in several respects. You know, first and foremost, obviously, some clients have been struggling with the high-interest rate burden. Particularly if they've got any level of leverage, this is going to help take some pressure off that, really depends on the extent of hedging. And we also think if rates get into the mid 3s or so, you'll see a reignite of both the venture business and the private equity business, which is important businesses for us.
JULIE HYMAN: Don, on that front, I'm curious what you're seeing in terms of demand for lending right now. And have you guys had to tighten your standards given the environment? Is this something that's going to allow you to, you know, open up a little bit more?
DON MCCREE: I would say we've tightened a little bit, but I think the right word is the word you started with is demand. There has not been a large demand out of our client base or out of corporate America in general. They have been worried about the economy and they have been worried about the level of rates. So they've toned down their investment in their businesses.
M&A is relatively muted. Lower rates could bring a little bit more M&A, which could drive loan growth. And we're also seeing a little bit of rotation with the lower tenure in particular back into the bond markets, which were quite quiet at the beginning of this year. So some of the assets are on bank balance sheet, were there temporarily until the public markets became more friendly from a rate standpoint.
