Fed Bumps Up Rates, Again
WASHINGTON - (09/22/04) -- The Federal Reserve, as expected,raised the target rate for overnight FedFunds by 25 basis pointsagain, Tuesday, pushing the benchmark rate for short-term loans to1.75%. The rate hike, the third in the past three months, isexpected to put greater pressure on credit unions to raise theirown savings and loan rates, according to Jeffrey Taylor, a NAFCUeconomist. "What credit unions need to start thinking about isrepricing," Taylor told The Credit Union Journal, noting thataverage savings rates at credit unions have been unchanged sinceJune, when the Fed first raised the overnight rate from a50-year-low of 1%. Otherwise, he said, credit unions are going tohave a hard time growing or retaining savings in the face of higherrates paid by competitors. They should also consider lifting theirloan rates, which continue to lag those charged by banks and othercompetitors, he added. Data compiled by DataTrac Corp. shows theaverage rates paid by credit unions have been unchanged at all-timelows of just 0.73% for regular shares; and 0.44% for share drafts(checking), since June, despite the Fed's actions.