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WASHINGTON: Lending declined in many parts of the United States over recent weeks, the Federal Reserve announced Wednesday, amid financial sector troubles unleashed by the rapid collapse of Silicon Valley Bank (SVB).

"Lending volumes and loan demand generally declined across consumer and business loan types," in recent weeks, the Fed announced in its regular report on economic conditions known as the Beige Book.

"Several Districts noted that banks tightened lending standards amid increased uncertainty and concerns about liquidity," the Fed said.

The conditions in New York's financial sector "deteriorated sharply coinciding with recent stress in the banking sector," according to the Book.

Central banks have yet to script final act of inflation fight as risks rise

SVB's collapse on March 10 after taking excessive interest-rate risk led to a snowball effect in the financial markets as concerned investors looked for signs of weakness in the broader banking sector in the US and Europe.

Another US regional bank failed in the aftermath of SVB's collapse, while the Swiss banking giant Credit Suisse became the highest-profile casualty a few days later when it was pushed by regulators to merge with its bitter rival, UBS.

Regulators on both sides of the Atlantic took swift action to stem the outflow of bank deposits by concerned customers.

A month on, the dramatic intervention by regulators appears to have paid off, with markets operating with far less volatility than they were in the days following SVB's collapse, according to the Vix volatility index.

The Fed's Beige Book also found that the elevated employment growth seen in recent months appears to have moderated somewhat, with several Federal Reserve districts reporting slower growth. However, wages have remained elevated.

Price levels rose moderately, according to the Fed, although it noted that "the rate of price increases appeared to be slowing."

Inflation remains stubbornly above the Fed's long-term target of two percent, despite an aggressive campaign of monetary tightening that has brought interest rates up to a level not seen since the global financial crisis.

Overall economic activity was little changed in recent weeks, according to the Fed.


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