Short-Term: Fed Rate Cuts Slow CULending

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MADISON, Wis. - (06/02/06) – The Fed’s tugging ofshort-term rates higher has apparently slowed loan demand at creditunions so far this year, with loans growing just 0.8% in April andby a three-year low of just 1.6% for the first four months of theyear. Loan demand for used cars, adjustable-rate mortgages and homeequity lines of credit–products closely tied to short-termrates, all declined in April, as the Fed continued to push the ratefor overnight FedFunds to a five-year high, CUNA reported Thursday.But deposit growth has also stagnated in the first part of theyear, with shares declining 0.5% in April, and growing by a 10-yearlow of just 2.7% for the first four months. More than $3 billion indeposits flowed out of the credit union system in April, the tradegroup reported. Regular shares, money market accounts and sharedrafts all declined for the month, as credit unions have been slowto raise their rates to attract new funds.

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