WASHINGTON—Will a new tax plan impact the speed of Federal Reserve rate hikes?
Mike Schenk, CUNA VP of research and policy analysis, said CUNA will be watching for that possibility.
“With the backdrop of tax reform, the big question is whether the simulative effects of that will be met by the Fed with more aggressive policies going forward. So the Jury is out,” said Schenk. “We are watching that closely and would be concerned about rates going up substantially faster than they have been going up. Because if that happens it will have an effect on credit unions’ bottom-line results.”
Schenk noted that last week the Federal Open Market Committee concluded their two-day meeting leaving the Federal funds rate unchanged. Schenk noted that most economists expect the Fed to raise rates 25 basis points in December, which CUToday.info has reported.
“That rate hike in December could have an implication on credit union margins going forward,” noted Schenk.
Schenk added that President Trump nominating Federal Reserve Governor Jerome Powell to become the new Fed Chairman is not expected to change forecasts for future rate hikes.
“Powell is viewed widely ads being relatively dovish, so most of us expect him to continue the policies adopted by (outgoing Fed Chairman) Janet Yellen,” said Schenk. “He has never voted against any of Yellen’s proposals, so most expect Federal Reserve policies to remain fairly stable going forward.”