Fed Rate Cut Means CUs Must Address Non-Term Share Rates

Credit Union Journal, The, May, 2008

The Federal Open Market Committee of the Federal Reserve dropped its overnight target rates by .25%, the seventh rate cut since September 2007.

In announcing the move, the FOMC said “the substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time.”

Brian Turner, director of advisory services at Southwest Corporate FCU, offered some insight into what this latest action means for credit unions.

“This will lead to an increased cost of liquidity during a period of time when loan originations are sluggish. With an overnight investment rate headed for 2% and alternative two-and three-year investment alternatives approaching 4.0 to 4.2 percent, that cost approaches 210...

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