ALEXANDRIA, Va.–Improving labor markets and falling unemployment rates over the past five years have been good for credit union loan growth, but CUs need to be prepared for rising interest rates, according to NCUA Chief Economist Ralph Monaco.
In a new Economic Update video, Monaco discusses economic conditions and the effect of rising interest rates for credit unions. The video can be found on the agency’s YouTube Channel.
“A solid labor market is very important for credit unions because it means growing loan demand, good loan quality, increased deposits and, potentially, rising membership,” Monaco said. “For credit unions, the outlook for fundamentals like employment and consumer demand should help to support credit union financial performance in 2017.”
However, credit unions should prepare for a continued rise in interest rates.
“The consensus of most analysts is that interest rates, both on the short end of the yield curve and the longer-term rates, are expected to increase,” Monaco said. “Now is a good time for credit unions to re-evaluate what their income and balance sheets might look like under a range of interest rate scenarios.”
NCUA said it is encouraging CUs to advantage of NCUA’s interest rate risk guidance and resource center to help prepare for changes in the new interest rate environment.