The Federal Reserve increased its benchmark interest rate one-quarter of a percentage point Wednesday—a decision that is likely to have little immediate impact, credit union economists said.
“On the whole, the impact of a quarter-point rate hike on U.S. households should be minimal,” said NAFCU Chief Economist and Director of Research Curt Long.
The increase was the first this year and additional increases are expected next year, with the Fed saying that the expectation of inflation has increased considerably.
“A 25-basis point hike in the Federal Funds rate today will affect credit unions in the medium-term,” Perc Pineda, CUNA’s senior economist said. “Deposit rates will be re-priced eventually, though not immediately. Credit unions savings rates have stayed well above the rates offered by the banks.”
However, Pineda said that if mortgage rates increase, credit unions will have to respond.
“If the upward pressure on loan rates strengthens in the near-term, credit unions would need to reprice their deposit products much sooner to compensate members the real rate of return on investment,” he said.
Long said the Fed will not make any assumptions of what will happen once President-elect Donald Trump takes office in January.
“The Fed will not make any assumptions about President-elect Trump’s economic agenda,” he said. “A large spending bill accompanied by tax cuts certainly has the potential to increase growth and inflation, paving the way for faster rate normalization in the coming years. But the Fed will stick to its wait-and-see approach.”
