In a video update released Dec. 23, NCUA Chief Economist Ralph Monaco said that while the stronger economy is good for credit unions, there is still uncertainty about the economic outlook and future path of interest rates.

In the video, Monaco discussed the affect of rising interest rates in a discussion of economic conditions.

“We’ve entered a new interest rate environment, where rising rates, both short- and long-term, are more likely,” Monaco said. “Now is a good time for credit unions to evaluate income and balance sheet changes across a range of potential interest rate scenarios, including one that looks like the Federal Reserve’s projection.”

With a rise in demand for autos and houses, credit unions are seeing a benefit from the rise in demand for big-ticket consumer goods, Monaco said. Auto sales were well above the pre-recession average in the third quarter of 2015. Home sales remain at a relatively high level. Both are an important for credit union lending, accounting for almost 85% of the credit union system’s loan portfolio, he said.

However, credit unions with ties to the energy or the manufacturing industries could be seeing weaker loan demand, higher delinquencies and lower deposit growth, according to Monaco.

He said that with the broader unemployment rate being the best the U.S. economy has seen in years, credit union members will benefit. He shared the graph at left in the video.

Monaco cited decreasing gas prices for improved automobile sales during the first two months of the third quarter. The improvement was primarily the result in sales of higher valued SUVs. The weakness in the energy sector helped improve other sectors, such as the auto industry, he said.

A rise in demand for homes increased the median price to $225,000 in October, he added.

Instant Insights /

NCUA Economist Urges Credit Unions to Model Rising Rates

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