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CU Economists Expect Ongoing Rate Increases

WASHINGTON-The Federal Reserve continued its bid to slow economic growth and inflation and added another 25 basis points last week to its target rate for overnight Federal Funds, pushing the benchmark rate to 2.25%. Economists widely predicted last week's rate hike-the fifth in the past six months-and anticipate the Fed will continue boosting short-term rates in the coming months. "I fully expect another 25 in February, and for them to pretty much keep hiking rates at every meeting until it (the target rate) gets to 4 or four-and-a-half percent" Jeff Taylor, a NAFCU economist, told The Credit Union Journal. "The question is, when will the long rates start heading up?' he asked.

He was referring to the fact that the boost in short-term rates has had no effect on mortgage rates, with long-term mortgage rates lower today than they were six months ago.

Cost Of Funds Is Rising

MADISON, Wis.-Credit unions are seeing their cost of funds rise even though they have yet to budge on the rates they pay on regular shares and share drafts since the Fed started hiking short-term rates six months ago.

That's because growing numbers of members are shifting their mix of funds from low-paying regular shares to higher-yielding certificates, according to Steve Rick, a CUNA economist.

The so-called mix effect is increasing credit unions' cost of funds even while they hold the line on regular share and share draft rates. Since the Fed began raising the target rate for overnight FedFunds on June 30, average rates paid by credit unions on regular shares and share drafts have remained almost the same, 0.74% and 0.45%, respectively, according to DataTrac Corp. But rates paid on all CDs, from three months to five years in maturity, have risen by an average of 30 bps to 46 bps, prompting a major shift into these products.

Whoops! For Mich. Robber

BAY CITY, Mich.-A suspect in last month's robbery at Copoco CU implicated himself when he wrote a note demanding cash on the back of a court document with his name on it, then dropped the incriminating evidence, along with some of the ill-gotten cash as he fled the credit union. The crumpled-up hold-up note was discovered by the postman walking his route across from the credit union the next day.

As a result, police arrested Michael Pascuzzo, 33, and charged him with bank robbery. The note said, "Put all the money in the bag. No die (sic) bombs! I don't want you to even look at me. Now wait to hit your alarm until I leave."

The message was written on the back of a notice from the Saginaw County Circuit Court for overdue fines for expired license plates. A search of Pascuzzo's apartment turned up about $130 of the $4,800 stolen from the credit union.

CUES Gets Ford Fndtn. Grant

NEW YORK-The Ford Foundation said it has awarded $100,000 to the Credit Union Executives Society, Madison, Wis., to study successful outreach programs.

The funds will be used to study programs under which mainstream credit unions are working to serve low-income communities through the National Federation of Community Credit Unions, New York.

The CUES findings will be made available to other credit unions for use in future outreach initiatives.

The Credit Union Journal's On Deadline coverage is sponsored by Liberty. For info: www.libertysite.com.

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