Yellen Testimony Matches CUNA Economists’ Outlook for 2017

WASHINGTON – Federal Reserve Chair Janet Yellen testified before the Senate Banking Committee Tuesday and the House Financial Services Committee Wednesday, and her remarks match CUNA economists’ prediction of moderate economic growth in 2017. Perc Pineda, senior economist at CUNA, also predicted rate hikes this year.

“Lower unemployment and higher inflation would necessitate additional increases in the Fed funds rate. We expect the Federal Open Market Committee will raise rates three times this year,” Pineda said. “March would probably be too soon considering that the monthly wage increase in January was only 0.1%, suggesting that slack in the labor market remains – although labor markets continue to strengthen. These three rate hikes are priced in our latest credit union operations forecast.”

Pineda also offered predictions about the economy’s effect on credit unions this year.

“We expect lower savings balances growth this year compared to last year as the anticipated transfer of funds to money market mutual funds will finally materialize,” he said. “With moderate economic growth and higher inflation, members will remain cautiously optimistic and seek higher returns.

“With interest rates gradually moving up, we forecast credit union loan balances to increase by 10% this year due to higher consumption on durable goods. New auto lending will stay upbeat in 2017,” Pineda added.

in Economic News