Credit Stabilizes, Economy Slows: Inflation and Soft Landing in Major US Banks' Forecasts

(1) The latest Credit Conditions Index from the American Bankers Association shows that the credit environment is expected to remain stable over the next six months. The index recorded 48.8 in the second quarter of 2026, up 11.3 percentage points from the previous quarter, yet it remains below the 50 threshold for the sixth consecutive quarter, indicating that bank economists still anticipate a slight softening in credit conditions. (2) As the labor market faces headwinds and the economy responds to external shocks, the Consumer Credit Index rose to 42.5, while the Business Credit Index jumped to 55.0, entering the expansion range. Economists estimate the probability of a recession in 2026 is only 25%, and they predict the inflation rate for personal consumption expenditures will remain above 3% for the rest of this year. (3) The Chief Economist of the American Bankers Association stated that despite high inflation and moderate employment growth, the economy is still expected to expand. Bank economists maintain a mixed and cautious outlook on consumer loans, while improvements in business credit conditions offset the weakness in consumer credit prospects.