Trends in Long-Term Commercial Bank Lending
Interest rates rose to unusually high levels in 1980, fluctuating widely and sharply throughout the year. The prime rate reached an unprecedented high of 20 percent in April, fell to 11 percent in July, then climbed to a historical high of 21 percent in December. Unexpectedly large fluctuations in interest rates create problems for commercial banks, since their profitability crucially depends on their net interest margins-the difference between their interest income and expense. Margins change as earning asset and liability volumes, maturities, and rates are adjusted in response to actual and expected market rate changes.
The views authors express in Economic Commentary are theirs and not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System. The series editor is Tasia Hane. This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. This paper and its data are subject to revision; please visit clevelandfed.org for updates.
This work by Federal Reserve Bank of Cleveland is licensed under Attribution-NonCommercial 4.0 International
- Share