The Federal Reserve Board is unlikely to raise interest rates when it meets this week, exacerbating problems for some credit unions, NAFCU Chief Economist Curt Long predicted Monday.
Long said that in the unlikely event that the Fed does raise rates, the increase would likely be 25 basis points. He added that the Fed would be unlikely to increase interest rates by more than 50 basis points next year.
Long said that low interest rates, coupled with the increased regulatory burden credit unions face, creates a difficult environment for some institutions.
“Small credit unions are most vulnerable, of course, and we continue to see a heightened rate of consolidation within the industry as result,” Long said.
He said that by deciding not to increase rates, the Fed would be indicating that the risk of a sudden rise in inflation is remote. “Economic growth remains sluggish and not yet in the range where they are worried about overheating,” he added.
Since any increase in rates would be small, it is unlikely to have much of an impact on members, Long said. He added that mortgage rates are unlikely to be affected as well.
