Credit conditions tightened in the month following Silicon Valley Bank's failure, the Federal Reserve's Beige Book report showed Wednesday.
These tougher conditions for lending anecdotally reported from the Fed's 12 bank districts suggested, however, this episode of stress in the banking sector hasn't hurt the economy broadly at this point.
"Overall economic activity was little changed in recent weeks," the report said. "Nine Districts reported either no change or only a slight change in activity this period while three indicated modest growth. Expectations for future growth were mostly unchanged as well; however, two Districts saw outlooks deteriorate."
The report added: "Several Districts noted that banks tightened lending standards amid increased uncertainty and concerns about liquidity."
The San Francisco Fed noted that in its district, "lending activity fell significantly in recent weeks amid higher interest rates and elevated uncertainty in the banking sector. Lending standards tightened notably, and several depository institutions opted to reduce loan volumes, especially for new clients, despite reporting ample liquidity."
"Reports indicated that existing and planned projects across sectors were delayed or cancelled due to higher funding costs, heightened uncertainty, and more limited access to credit," the SF Fed said. "Following recent volatility in deposit levels at regional and community banks, outflows have reportedly stabilized since late March."
In the Kansas City's Fed district, commercial real estate is feeling the brunt of this recent tightening in conditions.
"Following the recent financial market volatility, most contacts noted that lending for commercial real estate development is almost completely unavailable," the report said.
Despite tightening credit, overall the economy was little changed.
Three districts — Philadelphia, Richmond, and Kansas City— saw economic activity decline slightly, while the remaining districts saw flat to slightly higher growth. Consumer spending was flat to slightly down across the country.
The report also indicated a softening in the labor market, with several districts reporting a slower pace of growth than seen in recent months with companies better able to retain employees as wages moderated, but still remain elevated.
On inflation, overall prices rose moderately but the rate of price increases appeared to be slowing. Consumer prices increased on account of still-elevated demand as well as higher inventory and labor costs.
Fed officials will use this information when setting interest rates at their policy meeting in two weeks.