Skip to main content

Fed Kicks Off Two-Days of Meetings Today as Critics, Proponents Respond to Rate Increases; Plus, What CUs Should Expect

CUToday

WASHINGTON–The Federal Reserve’s Open Market Committee (FOMC) will kick off two days of meetings today and the decision they announce tomorrow will affect everything from the major U.S. markets to credit unions that are seeing strong loan growth to individual credit union members struggling with monthly bills.

Federal Reserve

The FOMC is widely expected to again raise its benchmark rate as it seeks to cool raging inflation.

Among those expecting rates to be higher by Wednesday afternoon is CUNA’s chief economist, Mike Schenk, who expects the Fed will push up rates by 75 basis points. That follows the full one percentage point increase made during the Fed’s July meeting.

“That’s pretty substantial, but inflation is over 9%,” said Schenk. “It’s the Fed’s job to slow that rate of inflation down.”

Schenk said any rate increase will have “implications” on credit union lending, which was roaring in the first half of 2022, when it was up 8%.

If the second half of the year were to match the first, overall loan growth at credit unions would finish 2022 at an astounding 20%, but Schenk said he does not expect that to happen and is instead projecting the year will finish with loans up 12%.

ROA will also be up substantially in 2022, he added.

Other Forecasts

Schenk is hardly alone in predicting the rate increase by the Fed.

“Many on Wall Street believe that the Fed is likely to raise interest rates by as much as a full percentage point. If that happens, it would be the first time the Fed has raised rates that much in one meeting since at least the 1980s,” noted the New York Times. “The central bank has vowed to do whatever it takes to lower inflation — much like it did in the 1980s under Paul Volcker.”

Critics of Policies

But the Fed has plenty of critics.In an opinion piece published in the Wall street Journal, Sen. Elizabeth Warren (D-MA) said the Fed’s interest-rate hikes “won’t address many causes of today’s inflation,” including skyrocketing energy prices.

And, as CUToday.info reported here, one new survey finds consumers  say they are “fed up” with the job the central bank is doing. That same analysis said consumers can expect to pay billions more in interest as the result of the rate increases.

Among the factors the Fed will be weighing as it makes its decision, according to the Times:

  • Earnings slowdown
  • An inverted yield curve (see CUToday.info report here)
  • The job market

Room to Move Higher

“Still, some argue that there is room for interest rates to move higher without causing an economic crash,” the Times reported.

The publication quoted  Peter Berezin, a global strategist at BCA Research, as arguing that job openings, as well as solid reserves at most large banks, should buffer the economy from a recession even if the Fed raises interest rates.

“What’s more, the expiration of pandemic-related aid should slow the excess money injected into the U.S. economy,” Berezin added.

Comments

Popular posts from this blog

Open Banking To Hit $94B By 2029—But U.S. Lags Amid Global Surge

Watch our Video on Understanding Open Banking NEW YORK—By 2029, open banking is projected to surge globally to a staggering $94.14 billion in value. Yet despite its rapid evolution and expanding global footprint, adoption remains uneven—hindered by inconsistent regulatory frameworks across countries. According to GlobalData, this disparity poses a key challenge for the sector’s success, with the U.S. notably trailing behind global peers in embracing open banking. The U.K. pioneered open banking and continues to be one of the leaders globally. The country has seen the number of users increasing, with there being 12.09 million active users of open banking in 2024 and 223.9 million payments made. This is an increase of 72% compared to the year before. “As open banking continues to flourish, it is positive to see that the Financial Conduct Authority (FCA) and Payment Systems Regulator (PSR) have outlined how open banking can expand further in the U.K., and also be used in variable...

Sunday Reading - What is the Declaration of Independence?

What is the Declaration of Independence ? The Declaration of Independence is the founding document that formally announced the American colonies' break from British rule. It laid the philosophical and moral foundation for American democracy, asserting that individuals possess inherent rights and that governments must be accountable to the people ( read summary here ). Although Thomas Jefferson is often remembered as the sole author ( read initial draft ), extensive collaboration shaped the Declaration. Benjamin Franklin and John Adams made small but impactful revisions— including Franklin’s reported suggestion  to change “We hold these truths to be sacred and undeniable” to “self-evident”—before submitting the draft to Congress. On July 4, 1776, the final text was adopted and sent to printer John Dunlap, who produced an estimated 200 broadsides that night—but that wasn’t the actual day of American independence . Congress had voted for independence two days earlier, ...

Why Avoiding "I" in Marketing Presentations Matters

  Grant Sheehan, CCUE | CCUP | CEO NCOFCU  You know how things just stick with you? Well, many years ago, my marketing professor started off his class with the following, and it has never left me.  The Power of Perspective: Why Avoiding "I" in Marketing Presentations Matters In the world of marketing, effective communication is paramount. One valuable piece of advice that often comes from experienced instructors and industry veterans is the importance of avoiding the use of the word “I” in presentations and reports. At first glance, this may seem counterintuitive; after all, many individuals feel that personal anecdotes and experiences can enhance a message. However, upon deeper reflection, the reasoning behind this approach reveals itself as essential for achieving impactful communication. Building Objectivity When marketing professionals present their findings or insights, it’s important to establish credibility. Utilizing data, surveys, and feedback from cu...

๐Ÿ‘จ‍๐Ÿ‘ฉ‍๐Ÿ‘ง‍๐Ÿ‘ฆ You Need to Prepare Now to Compete for New Fed Gov’t Funded Savings Accounts for Children

WASHINGTON–Credit unions, which often talk about the need for younger members, will now have the opportunity to compete in a new arena for the youngest members of all, as the recently passed reconciliation bill includes language creating and funding for a new savings account for children, with a one-time deposit of $1,000 from the federal government for those born in 2025 through 2028. The new accounts are expected to create a new battleground of competition for credit unions as every provider from banks to fintechs to others seeks to capture the accounts.  The final version of the bill makes the tax-free savings accounts for minors, called Trump accounts, a form of individual retirement account (IRA) under Sec. 408(a), according to the Journal of Accountancy. Under the legislation, the accounts will be IRAs (but not Roth IRAs) for the exclusive benefit of individuals under 18.  About the Contributions “Contributions can only be made in calendar years before the beneficia...

Agencies Issue Exemption Order To Customer Identification Program (CIP) Requirements

WASHINGTON--The Federal Deposit Insurance Corporation, the Office of Comptroller of the Currency, and NCUA, with the concurrence of the Financial Crimes Enforcement Network, issued an order Friday granting an exemption from a requirement of the Customer Identification Program (CIP) Rule implementing Section 326 of the USA PATRIOT Act. The CIP Rule requires a bank or credit union to obtain taxpayer identification number (TIN) information from its customer before opening an account, and the exemption permits a bank or credit union to use an alternative collection method to obtain TIN information from a third-party rather than from the customer, the agencies stated in a joint release. The order applies to accounts at all entities supervised by the agencies. "Since the CIP Rule was issued initially in 2003, there has been a significant evolution in the ways consumers access financial services, along with a rise in reported customer reluctance to provide their full TIN due, in part, to...