CUNA's Economists Projecting Economic Slowdown In 2007

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Economists with CUNA are projecting a notable economic slowdown in the U.S. during 2007, although they do not believe the economy will slide into recession.

"The coming year will be a difficult one for credit unions as the economy transitions to a slower growth path," said CUNA's Chief Economist Bill Hampel. "Savings growth will be hard to come by, and downward pressure on the bottom line will continue. However, because weaker growth will shore up net worth ratios, credit unions will be able to accept lower net income."

The forecast from CUNA's three economists, who in addition to Hampel include Mike Schenk and Steve Rick-lowers their outlook for economic growth for next year to 2% from 2.5%. Growth for all of this year will come in about 3.3%, after averaging 3.5% over the past five years, CUNA is projecting.

CUNA said the trio also believes that the Federal Reserve is essentially finished with raising interest rates for the current cycle-meaning the Fed Funds rate has "most likely" peaked at 5.25%. "There's a small chance it could hit 5.5%," Hampel added.

The shape of the yield curve will remain essentially flat, according to the forecast, until next spring when the Fed begins lowering the Fed Funds rate as the economy slows.

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