(please click ad for more information)

Current News

Relevant Information—For You, By You

INTEREST RATE FOCUS: CUs CAN PREPARE
updated 07/08/14 10:46 AM
Three Scenarios to Watch for
The future of when and how fast interest rates will rise is impacting every credit union—and to some degree will determine the industry’s ability to meet larger objectives being plotted in the current strategic planning season.

“No one can predict the future of interest rates,” said Dwight Johnston, vice president and chief economist for the California and Nevada Credit Union Leagues. “You might get lucky and guess right, but there is no clear path, especially with rates already so low.”

Ready for Any Outcome
How does this uncertainty impact your credit union’s planning?

Johnston says that unless a credit union’s management and board have “some great insight” about rates and plan on only one outcome, they’ll have to address the impact on the balance sheet and earnings across multiple outcomes.

“You can focus on budget projections using a consensus forecast, but you’ll need knowledge of what happens under other scenarios to prepare for Plans B and C if the tide turns on rates,” he said.

While there's a consensus forecast for rates the rest of 2014 and through 2015, the arguments for an extreme outcome, whether high or low, have merit, Johnston said. He presents three possible rate scenarios using the 10-year Treasury bond.

“For the past few years the low-rate path was, quite frankly, an easy call to make. You didn’t need to spend much time examining the impact of any other outcome,” he said. “That’s not the case in the coming months.”

Three Interest Rate Scenarios
Johnston gives the following simplified arguments for each interest-rate scenario on the 10-year U.S. Treasury bond so credit unions can plan appropriately (click on the accompanying chart). Credit unions can keep this guide in mind as the months ahead unfold:

  • Scenario 1 (low-rate forecast): The economies of Europe and China stumble, slowing down the U.S. recovery to stall speed. Deflation fears keep global interest rates at, or near, historic lows.
  • Scenario 2 (consensus forecast): The economy continues a slow but sustainable recovery, and interest rates begin a slow, steady climb. Stable inflation prevents any sharp increase in rates. The Federal Reserve does not tighten rates until late 2015.
  • Scenario 3 (high-rate forecast): The economy recovers faster than the Fed recognizes. Inflation expectations rise, and the Fed is perceived as behind the curve. The bond market revolts.

Click here for Dwight Johnston's complete interest-rate forecast commentary via the DJ's Economix webpage.

 
print   email   share   share   share

'BIG DATA' SPOTLIGHT: RISK OR REWARD updated 10/22/14 12:06 PM
Three Panelists Share Opinions
With Alessandro Acquisti as moderator, Wednesday’s audience was treated to a lively discussion—and a bit of back-and-forth debate—on the use of “big data” at credit unions and its ramifications.

SPEAKER DELVES INTO DATA PRIVACY updated 10/22/14 11:57 AM
The Credit Union Connection
As the Big Data Panel during REACH 2014 kicked off on Wednesday, it was apparent “big data” is everywhere and infiltrates all facets of our lives. But how much do consumers value their privacy, and what does it mean for credit unions?

SOCIAL CHARM: INGREDIENT FOR SUCCESS updated 10/22/14 07:59 AM
Chen Lizra at REACH
“Engagement” is one of the top buzz words circulating around REACH 2014—and TED speaker, business consultant, and author Chen Lizra shared some unique insights during the general session on Tuesday. Her buzz word: “social charm.”

INNOVATION PANEL SPURS TAKE-AWAYS updated 10/22/14 05:21 PM
Three CU Industry Perspectives
Attendees at REACH 2014 received a plethora of ideas from Tuesday’s innovation panel to take back to their credit unions—not the least of which included more interaction between employees and leaders, and free-flow of ideas from the bottom up.