ARLINGTON, Va. -- Raising certificate rates can be a good way to secure liquidity for lending in the short-term, NAFCU Chief Economist Tun Wai explained.
"There has been a lot of growth in CDs," Wai observed, and there is a direct correlation between the differential between credit union and bank CD rates and share growth at federally insured credit unions.
"This only works in certain periods," he said. "When members' income is so low and they don't have money to save...they don't have money to save."
However, he added, "When you talk about new money, that's when competition comes into play."
But raising CD rates into the long-term is not sustainable, according to Wai, because eventually the cost of funds catches up.