WASHINGTON - The recent surge in consumer installment debt signals a healthy economy and jibes with past experience, Federal Reserve Board governor Lawrence Lindsey said yesterday.
"I think it is fair to say that the strength in consumer credit seen so far is not out of line with historical pattern," Lindsey told the House Banking Committee.
On Tuesday, the Fed reported that consumer credit swelled at a 13.2% annual rate in April after rising 12.6% in March. Total credit has expanded at a double digit rate in the last "half year or so," well above the growth of 6.5% recorded last year, Lindsey said.
Lower interest rates and an earlier slowdown in the rate at which consumers took on mortgage and other debt have improved household balance sheets, Lindsey said, making individuals "feel more comfortable about taking on debt again." Consumers have also been lured by heavy promotion of credit cards and rebates based on sales volume, he said.
Lindsey also said that banks have been slow to raise rates on customer deposits this year in response to changing market conditions.
