THE BUSINESS JOURNAL ASKED SOME OF OC’S TOP BANKERS TO ASSESS THE LOCAL ECONOMY, AND ITS PROSPECTS IN THE COMING YEAR, GIVEN PENDING INTEREST RATE HIKES AND INFLATION. WHAT FOLLOWS ARE THEIR (LIGHTLY EDITED) RESPONSES.
FROM ASH PATEL
Commercial Bank of California
The local Orange County economy is growing. In fact, by all anecdotal appearances and available statistical data, it’s not only growing, it’s thriving.
We see this clearly in total OC employment, which is up 6% per annum as of November 2021. Moreover, a quick review of recent trends in the various O.C. real estate markets show continued strengthening in terms of absorption, rental rates and prices.
As we look towards the horizon, rising interest rates should have a slowing impact on the lending velocity in the area. However, the favorable overall economic circumstances could serve to maintain bank lending levels consistent with the calendar year 2021.
Business owners and real estate investors alike should expect measurably higher interests over the coming year. Although the magnitude and pace of the anticipated interest rate changes are quite uncertain, most market participants estimate a 0.5% to 1.0% increase in calendar year 2022.
Inflation is a very hot topic right now and it will certainly affect lending, predominately due to how inflation pressures cause a rise in nominal interest rates. All interest rates have the potential for rising by way of market dynamics—even in the absence of any measurable actions by the Federal Reserve. However, actions by the Federal Reserve most directly impact the most short-term interest rates (such as the targeted Federal Funds rate).
Read more of Ash's insights and bank updates in this week's issue of the Orange County Business Journal.