US banks, with their "eyes" on AI - Expect stronger demand for loans in 2026
Banks expect demand for business loans across all categories to strengthen this year after improving last quarter, a Federal Reserve survey showed. Most lenders say they expect lower interest rates and higher spending or investment needs to drive the trend.
Demand for business credit from large and mid-sized firms in the fourth quarter was the strongest since the second quarter of 2022, the Federal Reserve's quarterly Senior Credit Officers Survey found. Demand for credit from small firms remained unchanged, having declined in each of the previous three quarters.
The survey also showed that, while banks generally tightened lending standards for businesses in the fourth quarter, they generally did not expect further tightening this year, removing what had been a limiting factor for lending growth last year.
Online, the survey showed, banks reported being more likely to lend to firms that have high exposure to artificial intelligence.
Meanwhile, the survey showed that households expressed weaker demand for most types of loans last quarter, with demand for car loans at the lowest level since the first quarter of 2024.
Banks said they generally expect an increase in payment delays and payment discounts for business loans to small firms and for auto loan borrowers, while they expect loan quality for large firms to remain stable.
Last week, the Federal Reserve left its benchmark short-term borrowing rate at its current range of 3.50%-3.75%, signaling that a stabilizing labor market and higher-than-optimal inflation are likely to keep it from cutting interest rates again for some time. Policymakers had the survey of loan officers in hand when making their rate decision.
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