U.S. consumer credit rose $18.1 billion in July, crushing the $11.7 billion estimate and the prior month's $14.6 billion increase. Non-revolving credit—auto and student loans—surged $15.3 billion, the largest monthly jump in over three years, pushing the category to $5.186 trillion. Revolving credit added $2.8 billion, lifting credit card debt to a record $1.357 trillion.
The average credit card rate climbed to 22.15 percent, a level last seen three years ago when the federal funds rate sat nearly 200 basis points higher. That spread underscores the structural shift in consumer borrowing costs: households are paying near-peak rates in a still-restrictive policy environment.
Auto loans have essentially flatlined since late 2023, hovering around $1.6 trillion with minimal net movement over three years. Student loan balances, after a small $4.5 billion decline in June, have resumed climbing and now stand at all-time highs.
From a fixed-income lens, the data cuts two ways. The persistence of releveraging at 22.15% card rates signals either robust demand-side resilience or a creeping necessity to borrow for subsistence—either reading complicates a "lower-for-longer" thesis on rates. The wide spread between card rates and the current fed funds rate props bank profitability but strains household duration risk and future discretionary capacity. Futures markets will recalibrate: sustained consumer credit growth at these rate levels reinforces the "higher-for-longer" narrative, applying steady upward pressure on the short end of the yield curve and compressing near-term cut probabilities.
