PLANO, Texas -- Thanks to the impact that consumer inflation is having on overnight and short-term interest rates, credit unions' investment and consumer loan pricing could benefit this quarter.
With consumer inflation increasing 0.5% in December, the highest since April, coupled with the Federal Reserve Board's anticipated pull-back on the benchmark overnight rate for this quarter, short-term rates could stay up, which could help credit union consumer and mortgage rates, said Brian Turner, manager of advisory services at $10 billion Southwest Corporate Federal Credit Union.
"Even if term rates were to decline, most credit unions have enough asset duration to support gross yields through most of 2007," Turner said. "Those that heeded the advice to put some downside yield protection in their investment portfolios last year, when one to two-year rates reached their highest, have benefited the most."
Turner said for the time being, consumer inflation puts less downward pressure on overnight and short-term interest rates, which will be beneficial to consumer loan and investment rates. The current level of inflation will also help to keep long-term rates up and as a result, help support existing mortgage rates, he added.