WASHINGTON, April 16 A top U.S. Federal Reserve
official told a group of community bankers on Tuesday that
regulators recognize that low interest rates can cause
difficulties for banks but said rates should stay low until the
Keeping interest rates low has helped keep many borrowers
from missing loan payments even as the Fed's actions may be
squeezing profits at some banks, Fed Governor Elizabeth Duke
said at an American Bankers Association conference.
"Frankly, I would very much like to see higher rates, if
higher rates went higher because the economy was stronger," Duke
said. "I think to raise rates or to let rates rise in a very
weak economy would ... make the environment that much more
Duke said the banking industry appears to be stronger after
the 2007-09 financial crisis, with higher capital and liquidity
levels in place and bank portfolios improving.
But she said low loan demand is hurting bank earnings.
"I hear that banks just won't lend or don't want to lend. I
find no evidence of that," Duke said. "What I find is evidence
of intense competition for loans, and the rest of you are making
all the loans you can find to make."
She said the one exception could be in mortgage lending,
where credit remains tight.