Fed's Actions Push CU RatesHigher

Register now

MADISON, Wis. - (05/05/05) -- Credit unions, which are notoriouslyslow to react to market rates, have begun pushing up rates inresponse to the Federal Reserve's repeated hike in short-termrates. CUNA reported that 52% of credit unions raised rates theypay on one-year CDs and 25% raised their money market rates lastmonth after the Fed increased the target rate for overnight fundsby 25 basis points to 2.75% Another 9% of credit unions raisedtheir regular share rates. Short-term loans rates were alsoaffected, with 19% of credit unions lifting new rates for new carloans and 10% raising unsecured loan rates, while 7% increasedtheir rates for credit card loans. Observers expected more creditunions to follow suit in the coming weeks after the Fed movedTuesday to lift the overnight target rate by another 25 bps to 3%."The pressure to raise their cost of funds will continue," JeffTaylor, a NAFCU economist, told The Credit UnionJournal.

For reprint and licensing requests for this article, click here.