CUNA Economist: Rate Hike Getting Close Posted by Association of Vermont Credit Unions on 2:42 PM

A rate hike is on the horizon, according to CUNA Senior Economist Perc Pineda.  Pineda based his prediction on a strengthening economy the recent Federal Reserve decision to hold interest rates steady.

The Fed’s decision to keep the Fed funds rate unchanged has a strong signaling effect on credit union operations. One positive takeaway--as the Federal Open Market Committee  (FOMC) acknowledged that the case for a rate hike has strengthened--is that U.S. economy continues to improve and the next rate hike is closer” Pineda said. 

The view of CUNA's economists is that there will be one modest rate hike this year in December. As a result, loan and savings growth will stay positive as the Fed gradually raises rates higher.

“The labor markets continue to strengthen, however, there is room for further improvement. Inflation pressures are more evident today with wages and commodity prices, particularly oil, higher than last year,” he added. “Additional positive jobs and higher inflation data before the December FOMC meeting will provide stronger case for a rate hike. With the 2.9% third quarter GDP growth, a modest rate hike in December will keep the U.S. economy on track.”

According to the Federal Open Market Committee, the case for an increase has continued to strengthen, but it seeks “further evidence of continued progress toward its objectives.”